Eighth Circuit Denies TILA Rescission Claim, Misstates Scope of Right of Rescission

Recently, the Eighth Circuit denied a borrower’s attempt to rescind a loan pursuant to a three-year window granted by the Truth in Lending Act (“TILA”) in the event of a creditor’s failure to make the required disclosures.  The borrowers’ self-serving affidavits declaring they did not receive the required disclosures could not overcome the rebuttable presumption of delivery established by their signed acknowledgment of receipt of full disclosures.

In certain circumstances, TILA grants borrowers an unconditional three-day right to rescind a loan secured by a principal dwelling.  That period begins upon the consummation of the transaction or the delivery of the required rescission notices and disclosures – whichever occurs last.  In the event the creditor fails to make the required disclosures or rescission notices, the borrower’s right of rescission expires three years after the date of closing of the loan.

In Keiran v. Home Capital, Inc., the Eighth Circuit addressed the issue of what evidence was required to extend the rescission period from the three-day baseline to the alternate three-year statute of repose.  The borrowers argued that the bank did not provide them with the required amount of TILA disclosure statements, that the disclosure statements that were made contained material inaccuracies regarding finance charges associated with the loan, and that the bank did not timely and adequately respond to their original notice of rescission.

In defending against these claims, the creditor introduced acknowledgements of full disclosure signed by the borrowers. Under TILA, if a consumer acknowledges in writing that they have received the required disclosures, a rebuttable presumption of delivery arises that the creditor did, in fact, fulfill TILA’s disclosure requirements.  Here, the only evidence put forward by the borrowers to prove they did not receive the disclosures were self-serving affidavits stating they received one copy instead of the required two.  The Eighth Circuit distinguished this case from previous instances where similar affidavits were accepted as evidence because they were accompanied by other, extrinsic evidence proving the creditors had not provided all disclosures required under TILA.  A self-serving, conclusory affidavit, without more, is not enough to overcome the presumption created by a signed acknowledgement of receipt of disclosures.

The borrowers’ next claim they are entitled to rescission because there were material inaccuracies in the finance charges included in the disclosures. This argument failed because it was raised for the first time on appeal and therefore was waived by the borrowers.  Even if it was not waived, the Court held that there was no merit to the claim as the charges were within the statutorily allowed threshold for error.

Finally, the Court rejected the borrowers’ claim that the creditor failed to respond timely to the notice of rescission because the allegation was without merit and filed after the applicable three-day window allowed by statute.

Notably, the Eighth Circuit did not address the limitations on the right of rescission in its opinion, stating that:  “In transactions secured by a principle dwelling, the TILA gives borrowers an unconditional three-day right to rescind.” (citing to 15 U.S.C. 1635(a)).  This, however, is wrong:  § 1635(e) exempts four categories of loans secured by principle dwellings from this right of rescission, most notably loans made to acquire the property, commonly referred to as purchase-money transactions.

The entire opinion may be found here.