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Friday, May 4, 2012

ABA, Trade Groups File Brief Refuting CFPB in TILA Case

ABA and two other trade groups filed a friend-of-the-court brief asserting that the 10th District Court of Appeals should affirm a U.S. District Court’s decision that borrowers must file a lawsuit within three years of a mortgage loan’s signing to exercise their right of rescission.

The case, Rosenfield v. HSBC Bank, centers on the issue of whether borrowers who notify lenders of their intent to rescind must also sue their lenders within three years. The trade groups’ friend-of-the-court brief refutes one the CFPB filed with the 10th Circuit on March 26 in which CFPB said a lawsuit wasn’t necessary.

The CFPB argued that certain borrowers who did not receive Truth in Lending Act disclosures may cancel their loans as long as they notify the lender of their intent to cancel within three years. “[C]onsumers need not go to court to unwind the loan,” the CFPB brief said.

The trade groups asserted in their brief that such an approach would upset the careful balance of remedies found in TILA. “It would do so for the sake of a remedy that borrowers may invoke … when they are in default, when they have no genuine basis to rescind, and when they have no ability to tender the loan proceeds -- as the statute requires,” they said.

That approach also “would allow a borrower to strip a lender who complied with TILA of its security interest instantaneously and unilaterally. … [and] cast a long shadow of uncertainty over the housing finance market … that depends on certainty and predictability,” they added.

Read the brief.

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