Overview
In Jesinoski v. Countywide, 135 S.Ct. 790 (2015), the
Supreme Court clarified 2 important issues regarding a
borrower’s 3-year right of rescission under the Federal Truth
in Lending Act (“TILA”).
• Issue 1: To exercise the 3-year right of rescission, does
the borrower have to sue the lender? Or is sufficient for
the borrower to serve the lender with a rescission notice?
– The Supreme Court’s holding: Serving a notice is sufficient.
• Issue 2: Is returning the lender’s funds (“tender”) a strict
condition precedent to enforcing a rescission notice?
– The Supreme Court’s holding: No, tender is not a strict
condition precedent to enforcing a rescission notice.
Why Do We Care?
• Though not a perfect result, in past years most rescission
concerns were resolved by judicial interpretation.
– The requirement that a borrower return funds prior to the
rescission being effective provided useful leverage to the
lender or assignee.
• All components of the rescission process are now back
on the table.
– State and federal court decisions have to be homogenized
to the Jesinoski decision.
– State courts in particular are not familiar with the
complexities of TILA in general and rescission in particular.
– It will likely take time for appellate precedent to emerge to
provide guidance when responding to an alleged rescission
notice.
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