TILA Talk

Hello Paul,

Wonderful service you provide. The information on your site has saved my house and my sanity!

I have been researching bits of the TILA act and it seems that it applies to many loans–not just ones that are secured with property.

My question: I believe that people can also rescind credit card loans–again within the three year period. From what I’ve found, TILA also covers loans under $25,000 that don’t have to be attached to ‘property’. It also covers leases, I believe.

Do you know of anyone who has rescinded a credit card loan? Do you know of how the process would go? I believe that those with high rates would benefit from having their loans lowered and they could probably even do this in bankruptcy.

Leela

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Hi Leela,

The Truth in Lending Act (TILA) was enacted by Congress to ensure accurate and meaningful disclosure of the costs of consumer credit with the purpose of enabling consumers to make informed borrowing choices.  Specifically, 15 U.S.C. sec. 1601(a) reads:

The Congress finds that economic stabilization would be enhanced and the competition among the various financial institutions and other firms engaged in the extension of consumer credit would be strengthened by the informed use of credit. The informed use of credit results from an awareness of the cost thereof by consumers. It is the purpose of this subchapter to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing and credit card practices.

Leela, the TILA covers all consumer credit.  Part D of the TILA, the Fair Credit Billing Act, deals with credit card billing disputes, and Part E is known as the Consumer Leasing Act which covers advertising/disclosures for consumer personal property leases exceeding four months.  The rescission rights under the TILA, however, generally apply to non-purchase money mortgages secured by the debtors primary residence, although if a creditor did incorporate TILA rescission rights into a contract that wasn’t otherwise covered, then it could be argued that it would apply to that transaction.  There also exists the ability to rescind transactions outside of the TILA for a variety of reasons outside the scope of this response.

One of the main facets of the TILA extended right to rescind is that it strips the lien and is in effect treated with the same status as unsecured debt in a bankruptcy.  Credit cards, of course, are already unsecured status.  It should be noted that Courts can condition the rescission on a proper tender and so it’s not as simple as it sounds; there is in fact a great deal of work involved for a knowledgeable attorney; hence, my previous post looking for Florida Truth in Lending Act attorneys. 

Thanks for the questions 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.