Dear bank: I want my house for free
Posted on 01/23/2015 at 11:58 AM by John Lande
The United States Supreme Court recently decided a case based on a Truth in Lending Act (TILA) provision that allows consumers to rescind a loan if they do not receive certain TILA disclosures. This blog previously covered the case Jesinoski v. Countrywide Home Loans. The Supreme Court's recent decision sided with the consumers. TILA allows consumers to rescind certain loans within three days of consummation of the loan if they receive TILA disclosures, and up to three years after the date of the transaction if no disclosures are provided. All TILA requires of consumers is that they provide written notice to the bank. This TILA provision applies to refinancing loans, home equity lines of credit, and home improvement lines of credit secured by a consumer's principal dwelling. The fighting issue was whether merely sending a bank a letter is sufficient 'notice,' or if TILA requires the filing of a lawsuit in court within three years. The Supreme Court concluded that TILA is unequivocal. All a consumer must do is send the bank written notice within three years if the bank failed to provide the required disclosures. This could be a letter, and need not be a lawsuit.
This is an important ruling for banks. Even if a bank provides the TILA disclosures, consumers still have three days to rescind the loan, and they may do so merely be sending a letter. Banks need to make sure their internal procedures ensure that these letters reach the proper officer in the bank. These letters may not come to the employees who know what they are, so it is important for banks to make sure they properly train their employees and have good policies in place. If they don't, then banks may end up giving away a house for free.
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