The Eighth Circuit has now joined the Tenth Circuit in ruling that notice alone within the three-year period is insufficient to validly exercise a right to rescind.
In its decision issued on July 12, 2013 in Keiran v. Home Capital, Inc., the Eighth Circuit rejected the borrowers’ argument that they had validly rescinded their mortgage loan by sending a notice of rescission to the bank within the three-year period.
As part of its amicus program, the CFPB filed amicus briefs supporting the borrowers in three other similar cases. In Gilbert v. Residential Funding LLC, et. al, the Fourth Circuit adopted the position advocated by the CFPB in an amicus brief filed in another Fourth Circuit case involving the same rescission issue. The CFPB’s position was also adopted by the Third Circuit in Sherzer v. Homestar Mortgage Services. However, the CFPB’s position was rejected in Rosenfield v. HSBC Bank, USA, the Tenth Circuit case whose reasoning was followed by the Eighth Circuit.
While it held that the borrowers had not preserved their right to rescind because their lawsuit seeking rescission was not filed within the three-year period, the Eighth Circuit nevertheless ruled that the borrowers had a cognizable claim for damages based on the bank’s refusal to rescind. According to the court, even though the borrowers’ right to rescind was extinguished, their failure to rescind cause of action accrued when the borrowers requested rescission and the bank denied their request. Since the borrowers filed their lawsuit seeking damages within one-year of the denial, the court found their damages claim was timely. However, the court ultimately denied the borrowers’ damages claim because they had not established TILA violations entitling them to rescind their loan.
Should the borrowers file a petition for certiorari, the clear circuit split increases the likelihood of the U.S. Supreme Court agreeing to hear the case.