The American Bankers Association, American Financial Services Association, Consumer Bankers Association, Consumer Mortgage Coalition, Independent Community Bankers of America, and Mortgage Bankers Association (the “Trade Groups”) have filed a brief as amici curae in support of the respondents in an appeal before the Supreme Court of the United States that involves a Truth in Lending Act (TILA) issue that has created a split among the circuit courts.
The issue before the Supreme Court is whether a borrower has exercised his right to rescind a transaction in satisfaction of the requirements of section 1635 of TILA by “notifying the creditor” in writing within three years of the consummation of the transaction, as the Third, Fourth, and Eleventh Circuits have held, or must a borrower file a lawsuit within three years of the consummation of the transaction, as the First, Sixth, Eighth, Ninth, and Tenth Circuits have held. The petitioners, husband and wife borrowers, have asked the Supreme Court to reverse the Eighth Circuit’s decision to adopt a uniform rule to be applied throughout the country.
The Trade Groups contend that section 1635(f) is a statute of repose that extinguishes the right to rescind after three years, barring any suit premised on that right. The Trade Groups also argue that the petitioners’ interpretation would cause substantial harm to creditors, borrowers, and the courts. They claim that requiring borrowers to file a lawsuit within three years provides certainty to the marketplace and avoids unnecessary litigation while preserving borrowers’ rescission rights. According to the Trade Groups, the petitioners’ interpretation that notice is sufficient to effect rescission actually puts borrowers in a worse position. The Supreme Court granted certiorari on April 28, 2014.
The United States, through the Consumer Financial Protection Bureau, has filed a brief asking the Supreme Court to reverse the Eighth Circuit’s judgment. The AARP, National Consumer Law Center, ACLU, National Association of Consumer Advocates, and Center for Responsible Lending also filed an amici curiae brief in support of the petitioners. The petitioners also received the support of over a dozen states, who filed an amici curiae brief as well.
The Supreme Court has scheduled oral argument for November 4. We will be monitoring oral argument and providing our analysis of this Supreme Court decision that is expected in early 2015.