What’s the Purpose of Rescission?

The Truth in Lending Act (TILA)/Regulation Z is all about getting information into a consumer’s hands so they can make informed decisions and compare credit terms. The CFPB states:

The TILA is intended to ensure that credit terms are disclosed in a meaningful way so consumers can compare credit terms more readily and knowledgeably… all creditors must use the same credit terminology and expressions of rates. In addition to providing a uniform system for disclosures, the act:

  • Protects consumers against inaccurate and unfair credit billing and credit card practices;
  • Provides consumers with rescission rights;
  • Provides for rate caps on certain dwelling-secured loans;
  • Imposes limitations on home equity lines of credit and certain closed-end home mortgages;
  • Provides minimum standards for most dwelling-secured loans; and
  • Delineates and prohibits unfair or deceptive mortgage lending practices.

As mentioned above, TILA provides consumers with rescission rights. So, what exactly does that mean? Essentially, in certain instances, when a loan is secured by a borrower’s primary dwelling, the borrower gets three days to think about whether they really want to enter into the transaction or if they want to back out.

Kevin explains more in the video.

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Kevin Edwards

Kevin brings years of experience and a unique perspective on regulatory matters to our clients. A self-proclaimed geek and accredited CRCM, Kevin is also a recovering attorney with experience as in-house counsel for a large regional bank and one of the leading national title insurance providers. For reasons unknown, Kevin decided to leave the safety and serenity of his desk job to seek fortune and glory as a wandering adventurer. Like a bank compliance version of Kwai Chang Caine, The Man with No Name or Don Quixote, he now travels the land seeking to help those in need and righting compliance wrongs, wherever he may find them. Kevin lives in Sioux Falls with his two children, who are surprisingly normal after having endured their father’s vivid imagination for their entire lives. He won’t admit to having any hobbies, because apparently “Regulations never sleep.” (While he does say this in his Batman voice, we’re pretty sure he’s joking.) From the looks of his Facebook page, he likes the outdoors and spending time with his large extended family (who seem like relatively normal people).

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What’s the Purpose of Rescission?