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.

Published
2024/05/20