Opinion ID: 663173
Heading Depth: 2
Heading Rank: 2

Heading: Rodash's Rescission of the Transaction

Text: 7 On the closing date of January 18, 1991, the appellees provided Rodash the Notice of the Right to Cancel. On a separate, single sheet of paper, the appellees provided an acknowledgment that the Notice of Right to Cancel was received and provided an Election Not to Cancel, a pre-printed waiver of that right. 2 Beneath the waiver provision, Rodash signed the sole signature line on the paper. The appellees maintain that by signing this document Rodash waived her right to rescind the contract. Rodash, who rescinded the agreement in December 1991, contends that Empire's provision of the Election Not to Cancel on January 18 violated TILA because she had an unqualified right to rescind the transaction within three business days. Rodash also contends that the appellees violated TILA because they did not clearly disclose her right to rescind as required by the Act. 8 As part of TILA, Congress provided the consumer with the right to rescind a credit transaction by notifying the creditor within set time limits of the consumer's intent to rescind. 3 Williams, 968 F.2d at 1139. See 12 C.F.R. Sec. 226.23(a) (restating consumer's right of rescission). TILA specifically permits a consumer borrower to rescind a loan transaction that results in the creditor taking a security interest in the consumer's principal dwelling. In re Porter, 961 F.2d 1066, 1073 (3d Cir.1992); see 15 U.S.C.A. Sec. 1635(a). The consumer has an absolute right to rescind the agreement for three business days following the closing of the transaction. 15 U.S.C.A. Sec. 1635(a); 12 C.F.R. Sec. 226.23(a)(3). In addition, the consumer's ability to rescind an agreement may be extended for up to three years if the creditor fails to make all material disclosures to the borrower, including disclosure of the right to rescind. 12 C.F.R. Sec. 226.23(a)(3). 9 The purpose of the three-day waiting period is to give the consumer the opportunity to reconsider any transaction which would have the serious consequence of encumbering the title to his [or her] home. S.Rep. No. 368, 96th Cong., 2d Sess. 28 (1980), reprinted in 1980 U.S.C.C.A.N. 236, 264. Thus, the sole instance in which the statute and its implementing regulations allow the consumer to waive her right to rescind within three days is where the consumer believes that a bona fide emergency necessitates an immediate extension of credit, in which case the consumer must sign a dated, handwritten statement that describes the emergency. 12 C.F.R. Sec. 226.23(e). Printed forms may not be used for this purpose. Id. Here, the appellees attempted to modify the rescission by having Rodash sign a pre-printed waiver of her right to rescind. This is prohibited. See id. Hence, we find the putative waiver to be invalid. Accordingly, our inquiry is whether the appellees' Notice of Right to Cancel is deficient, as Rodash's attempt to rescind came after the three-day cancellation period following the transaction but before three years had passed. 4 10 Under the Act, the creditor must clearly and conspicuously disclose the consumer's right to rescind the transaction. 15 U.S.C.A. Sec. 1635(a); see 12 C.F.R. Sec. 226.23(b)(2) (Notice [of right to rescind] shall be on a separate document that identifies the transaction and shall clearly and conspicuously disclose ... [t]he consumer's right to rescind the transaction.). To determine whether the notice given Rodash was confusing or misleading, this Court must scrutinize the circumstances of the transaction. See In re Porter, 961 F.2d at 1076 (determination of clear and conspicuous notice of rescission rights under TILA is intensely fact-based). As noted supra, the creditor's subjective intent is irrelevant to this determination; rather, notice of the right to rescind must be objectively conspicuous and apparent. Zamarippa, 674 F.2d at 879. The issue, then, is whether the appellees' provision of the Election Not to Rescind on January 18, 1991 prevented clear and conspicuous notice of Rodash's right to rescind within three days. We hold that it did. It is without question that this boilerplate provision precluded clear and conspicuous disclosure to Rodash that she had the right to rescind the agreement within three days of entering the mortgage purchase. Rather, it is far more likely that the primary effect of the appellees' providing Rodash the Election Not to Cancel at the closing was to confuse Rodash about her right. 11 Several considerations compel this conclusion. First, the appellees' proffering of the Election Not to Cancel during the transaction would confuse any reasonable borrower because it implies, incorrectly, that waiver is generally possible within the three-day cooling off period. Indeed, the presentation of the waiver form on the day of the transaction contradicted the very purpose of the cooling off period: to give the consumer time to consider the terms of her financial commitments. Second, by having Rodash sign a certificate of non-rescission on the date of the transaction, the appellees suggested that she had foreclosed her right of rescission. Thus, if Rodash had changed her mind the next day and wished to rescind the transaction, it would have been reasonable for her not to have exercised that right as a direct result of the improper furnishing of the Election Not to Cancel. Third, the appellees' practice of placing the acknowledgement and the waiver on the same page--indeed, in the same boilerplate paragraph--is confusing because an objective borrower may not understand what she is signing. Finally, we find that the appellees' practice of handing the consumer a waiver form the same day as the mortgage and Note is a misleading one, as the consumer, here Rodash, could reasonably think that she had to sign that form--as she must sign other forms--to consummate the mortgage transaction. 5 12 Considered together, the Notice of Right to Cancel and the Election Not to Cancel do not constitute a clear and conspicuous disclosure of the three-day right to rescission under TILA. The Notice announces that there are three business days to rescind, but it is accompanied by the Election announcing in boilerplate that rescission has been declined at the outset such that no rescission period exists. These contradictory documents preclude the possibility of clear disclosure. Accordingly, the appellee violated TILA, and the district court erred as a matter of law by denying Rodash's summary judgment motion and granting the appellees' motion. On this ground alone, we reverse the district court. Nonetheless, in part III.C, we also reverse the district court on the ground that the appellees violated TILA by understating the finance charge. 13