South-Western Legal Studies in Business

Giving Creditor Conflicting Rescission Forms Violates TILA
Description

Appeals court held that for a mortgage company to give a creditor conflicting forms about the right to rescind violated the TILA rule of a clear and conspicuous disclosure statement that includes the right of rescission. That violation gave the consumer up to three years within which to rescind, rather then three days.

Topic

Consumer Protection

Key Words

Truth in Lending Act; Notice; Defect; Mortgage

C A S E   S U M M A R Y
Facts

Handy obtained a new mortgage on her home from Anchor Mortgage. TILA requires that a creditor clearly disclose to a borrower her right to rescind the loan within three business days. If the creditor fails to do so, the right to rescind may be extended to three years. Two years after obtaining the mortgage, Handy sought to rescind the loan based on TILA disclosure defects. At closing, she was given two rescission forms, one form was proper; the other stated that if she rescinded, it would not cancel the loan. The trial court held for Anchor, ruling that the different forms were not significant, that Handy could have still rescinded within three days if she wanted to do so. Two years later made little sense. She appealed.

Decision

Reversed and remanded. Providing the borrower two rescission forms, one of which was inappropriate, violates the TILA requirement that the notice be clear and conspicuous. An ordinary consumer would be confused by the different forms; one of which stated that the loan was not rescinded in the event it was rescinded. That violation of TILA gave Handy up to three years in which to rescind the mortgage.

Citation

Handy v. Anchor Mortgage Corp., 464 F.3d 760 (7th Cir., 2006)

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