Opinion ID: 2832760
Heading Depth: 2
Heading Rank: 2

Heading: The TILA Claim

Text: Congress enacted TILA to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available . . . and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing . . . . Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412 (1998) (quoting 15 U.S.C. § 1601(a)). TILA allows consumers to obtain specific disclosures on charges, fees, interest rates, and their rights under the loan. Id. (citing 15 U.S.C. §§ 1631, 1632, 1635, 1638). One such right a consumer has under TILA is the right to rescind the loan if the lender fails to deliver certain forms and to disclose important terms accurately, provided that the loan is secured by the borrower's principal dwelling. See 15 U.S.C. § 1635. The parties agree that the 2004 Transaction is subject to TILA.7 Sheedy argues that the TILA disclosures she received did not comply with Regulation Z because some of the amounts disclosed turned out to be inaccurate and because her husband never received any disclosures. According to Sheedy, the consequence of her husband not receiving these disclosures is that the 2004 Transaction is subject to rescission under 15 U.S.C. § 1635(a). 7 Pursuant to 15 U.S.C. § 1633, the Board of Governors of the Federal Reserve System has exempted some credit transactions in Massachusetts that are instead regulated under Massachusetts General Laws Chapter 140D, § 10(a). See In re Smith-Pena, 484 B.R. 512, 517 (Bankr. D. Mass. 2013); 12 C.F.R. § 226.29. -12- Additionally, Sheedy argues that the Secured Creditors cannot avoid liability under TILA by relying on disclosures given as part of the loan obtained when she transferred the property to herself in 2003 because, being a refinancing transaction, the 2004 Transaction required additional disclosures beyond the ones already received by her in 2003. See 12 C.F.R. § 226.20(a) (A refinancing is a new transaction requiring new disclosures to the consumer.). We conclude, however, that Sheedy's TILA claim is timebarred and there is no controversy as to the applicable statue of limitations.8 Under TILA, a consumer's right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first, notwithstanding the fact that the information and forms required under this section or any other disclosures required under this part have not been delivered to the obligor . . . . 15 U.S.C. § 1635(f); see also Beach, 523 U.S. at 413. In fact, a consumer may exercise the right to rescind any extension of credit carrying a security interest over his principal dwelling until midnight of the third business day after the extension of credit, after receiving notice of the right to rescind, or after receiving 8 We note that Sheedy's counsel appeared to concede at oral argument that her TILA claim was time-barred as a statutory claim. Nevertheless, we examined it in an attempt to clarify Sheedy's arguments and to avoid confusion regarding her statements that the federal law claims are related to the state law claims, that TILA relief that is time-barred can still be requested in recoupment, and that the TILA claim informs her other state law claims. -13- all material disclosures. 12 C.F.R. § 226.15(a)(3). It is when these disclosures are not delivered that the right to rescind shall expire 3 years after the occurrence giving rise to the right of rescission, or upon transfer of all of the consumer's interest in the property, or upon sale of the property, whichever occurs first. Id. Thus, applying the longer three-year period based on Sheedy's assertion that her husband never received any disclosures, we agree with the courts below that any claim for rescission under TILA for lack of disclosures or inaccuracies was brought more than three years after the consummation of the 2004 Transaction and is time-barred. Conscious of this limitations period, Sheedy next argues that she would still have a right to request rescission in recoupment by raising it defensively under the Massachusetts statute. Beach recognized that a debtor in a collections action has a right to plead recoupment, a defense arising out of some feature of the transaction upon which the [creditor's] . . . action is grounded, [which] survives the expiration of the period provided by a statute of limitation that would otherwise bar the recoupment claim as an independent cause of action. 523 U.S. at 415 (citations and internal quotation marks omitted). However, in this case, because Congress clearly intended that any TILA action brought outside of the three-year statute of limitations be timebarred, there is no independent ground to raise the right as a -14- defense in recoupment. See id. at 418 (We respect Congress's manifest intent by concluding that the [TILA] permits no federal right to rescind, defensively or otherwise, after the 3-year period of § 1635(f) has run.).