Use It or Lose It: The Fourth Circuit Keeping the Right to Rescind Under TILA Out of the Courts in Gilbert v. Residential Funding LLC.

BY Jared A. Knight

The Truth in Lending Act provides a borrower the unconditional right to rescind a mortgage from the point of consummation until midnight on the third business day following the consummation of the mortgage transaction. However, if a lender fails to make certain required disclosures, the right is extended until all of the required disclosures are made or until three years have passed since the date of consummation. Issues arise when a borrower delivers notice of her intent to rescind but fails to file a claim before the three-year time frame elapses. Although the statute requires only that the borrower deliver notice of the intent to rescind, many circuits hold that a borrower must also file a claim in order to exercise the right. However, the Fourth Circuit recently disagreed with this view and held that notice alone is sufficient. This Recent Development argues that the Fourth Circuit is correct. There is no statutory basis to require that a borrower file a claim within the three-year time frame to exercise the right of rescission. For a court to superimpose such a requirement is to confuse the plain language of the statute and accompanying regulation and to give the lender an unfair advantage.

DOWNLOAD PDF | 91 N.C. L. Rev. 148 (2013)