On April 28, the U.S. Supreme Court granted certiorari in Jesinoski v. Countrywide Home Loans, Inc., No. 13-684, an appeal of the U.S. Court of Appeals for the Eighth Circuit’s September 2013 holding that a borrower seeking to rescind a loan transaction under TILA must file suit within three years of consummating the loan, and that written notice within the three-year rescission period is insufficient to preserve a borrower’s right of rescission.
TILA Section 1635 grants borrowers the right to rescind a transaction “by notifying the creditor” and provides that a borrower’s “right of rescission shall expire three years after the date of consummation of the transaction” even if the “disclosures required . . . have not been delivered.” In Jesinoski, the Eighth Circuit cited its July 2013 holding in Keiran v. Home Capital, Inc., 720 F.3d 721 (8th Cir. Jul. 12, 2013), in which the court reasoned that the text of the statute, as explicated by the Supreme Court in Beach v. Ocwen Federal Bank, 523 U.S. 410 (1998), established a strict limit on the time for filing suits for rescission. The Eighth Circuit expressly rejected an argument presented in an amicus brief filed by the CFPB that the lender, rather than the obligor, should be required to file suit to prevent rescission. To adopt the CFPB’s position, the court explained, “would create a situation wherein rescission is complete, in effect, simply upon notice from the borrower, whether or not the borrower had a valid basis for such a remedy. Under this scenario, the bank’s security interest would be unilaterally impaired, casting a cloud on the property’s title, an approach envisioned and rejected by Beach.”
In holding in favor of the lender, the Eighth Circuit joined the majority of the circuit courts that have addressed the issue—the First, Sixth, Ninth, and Tenth Circuits all previously have held that a borrower must file suit within the three-year rescission period, while the Third, Fourth, and Eleventh Circuits have held that written notice is sufficient to preserve a borrower’s statutory right of rescission. BuckleySandler filed an amicus brief in Keiran on behalf of a group of industry trade groups, as it has done in three other circuit court cases on this issue.
The Supreme Court now may resolve this circuit split. Like the prior circuit court cases, the Supreme Court’s review of the issue likely will draw attention and briefs from lenders, the CFPB, and consumer groups.