A TILA Story – Don’t Be A Shelton

What happens if a person rescinds properly under TILA within 36 months and cannot tender the redone balance due?

Bob

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Hello Bob,

The plain language of the statute requires the lender to cancel the security interest, although courts have held that they have equitable authority to make rescission conditional on the consumer’s tender.  Of course the most likely result is that the lender will simply ignore the rescission request.   

Your question reminds me of American Mortgage Network Inc. v. Shelton, 486 F.3d 815 (4th Cir. 2007). 

The Sheltons construe § 1635(b) as requiring Amnet to unconditionally release the security interest on the Sheltons’ residence within 20 days of notification of cancellation, regardless of the Sheltons’ admitted inability to tender the balance due on the loan, or reasonable value thereof. In fact, the Sheltons argue that the trial court erred in not declaring the loan balance forfeited by reason of Amnet’s refusal to unconditionally remove the mortgage lien. In essence, the Sheltons claim the right to simply walk away with a windfall of $313,468 without any further obligation. This construction not only offends traditional notions of equity, but misinterprets the procedural requirements of § 1635(b).

Read: Don’t Cut Yourself With the TILA!

Thanks for the questions, don’t be a Shelton, and hope this helps.

Paul

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.