Fourth Circuit Reverses Dismissal of TILA Claim

Posted on May 11th, 2012 in Courts, Mortgages By BuckleySandler

On May 3, the U.S. Court of Appeals for the Fourth Circuit held that a borrower need only provide notice within TILA’s three-year rescission period in order to properly exercise a right to rescind. Gilbert v. Residential Funding LLC, No. 10-2295, 2012 WL 1548580 (4th Cir. May 3, 2012). Gilbert endorses the CFPB’s position on valid exercise of rescission under TILA, as articulated in recent amicus briefs filed in the Third, Fourth, Eighth and Tenth Circuits.  This position holds that TILA’s notice provision does not require the filing of a formal lawsuit and can instead be satisfied by simple written notice. Here, the borrower notified his servicer of his intent to rescind within the three-year period but did not commence the related lawsuit until some time later. The Fourth Circuit reasoned that the “plain meaning” of TILA permits borrowers to timely exercise their right to rescind by sending notice of rescission to the mortgage servicer within three years of a loan’s closing, while noting that ultimate rescission or voiding of the contract would necessitate consent of the servicer and/or a borrower lawsuit.

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