Barrett v. Bank One NA
Truth in Lending Act
Eastern District of Kentucky at Lexington
SUTTON, Circuit Judge. The Truth in Lending Act, Pub. L. No. 90-321, 82 Stat. 146 (codified as amended at 15 U.S.C. § 1601, et seq.), “was enacted to promote the informed use of credit by consumers by requiring meaningful disclosure of credit terms,” Begala v. PNC Bank, Ohio, N. A., 163 F.3d 948, 950 (6th Cir. 1998). “[W]hen a loan made in a consumer credit transaction is secured by the borrower’s principal dwelling,” the Act permits the borrower to “rescind the loan agreement,” Beach v. Ocwen Fed. Bank, 523 U.S. 410, 411 (1998), up to three business days after the transaction, see 15 U.S.C. § 1635(a).
When the lender “fails to deliver certain forms or to disclose important terms accurately” to the borrower, the Act extends the borrower’s right to rescind the transaction to three years. Beach, 523 U.S. at 411. And when the Act permits borrowers to rescind “the transaction,” 15 U.S.C. § 1635(a), it permits them not only to remove the security interest on their home but also to recover certain fees incurred in the transaction, id. § 1635(b). Seeking to benefit from declining interest rates, William and Sandra Barrett refinanced a mortgage on their home several times in 2000 and 2001. In May 2000 and again in January 2001, the Barretts borrowed money from Bank One, securing the loan in each instance with a security interest in their home.
In May 2001, they refinanced their obligations with Bank One with a loan from another lender, prompting Bank One to release its security interest in the Barretts’ home. Roughly two years later, the Barretts complained that Bank One had violated the Act’s disclosure requirements in lending them money in May 2000 and January 2001 and sought to rescind both transactions. Bank One refused, claiming that both loans had been refinanced and that both security interests had been removed, leaving nothing for the bank to rescind. The district court agreed with the bank. We reverse because nothing in the legislation or its implementing regulations says that the act of refinancing extinguishes a borrower’s unexpired right to rescind a loan transaction and because the right to rescind a transaction under the Act not only gives consumers the right to release the security interest in their home but also gives them the right to recover certain fees incurred in the transaction.