The Consumer Financial Protection Bureau (CFPB) has filed an amicus brief in the U.S. Court of Appeals for the 10th Circuit in Denver, Colo., arguing that certain borrowers who did not receive important disclosures mandated by the Truth-in-Lending Act (TILA) may cancel their loans so long as they notify the lender of their intent to cancel within three years.
“We are committed to making sure that borrowers can exercise their rights to the full extent allowed under this law,” said CFPB Director Richard Cordray. “The consumer’s right to cancel gives lenders a powerful incentive to provide the disclosures that consumers need to make good financial choices.”
Congress gave the CFPB the authority to implement and interpret TILA. As CFPB’s amicus brief explains, TILA requires lenders to disclose to borrowers taking out home-equity loans and second mortgages various credit terms, including annual percentage rates (APRs) and finance charges.
Under TILA, if borrowers do not receive these important disclosures, they are legally allowed to “rescind”—that is, unwind or cancel—their loans within three years. When a borrower cancels a loan on this basis, the lender must release its liens against the borrower’s home, and the borrower must return the loan he or she received from the lender.
TILA specifies that consumers can cancel a loan under this provision by notifying their lenders of their cancellation within three years of signing their loan documents. The question raised by the case, Rosenfield v. HSBC Bank USA, is whether borrowers also must file a lawsuit against their lenders within three years. The CFPB’s brief explains that they do not need to do so. If the lender ignores the consumer’s timely notice or refuses to cancel the loan, the courts can determine in subsequent litigation whether the consumer’s exercise of the right to rescind was valid, even if that litigation starts after the three-year timeframe has expired.
The CFPB maintains that it is committed to filing amicus briefs in litigation involving the federal consumer financial protection laws that it oversees and in which the CFPB determines its views will assist the courts in correctly resolving the matters. Amicus briefs are an important way for the CFPB to ensure that the statutes it oversees are correctly and consistently interpreted by the courts, even in cases in which the CFPB is not itself a named party.