Opinion ID: 870173
Heading Depth: 2
Heading Rank: 1

Heading: TILA Rescission Rights

Text: TILA, as contained in Title I of the Consumer Credit Protection Act, provides consumers with various protections “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.” 15 U.S.C. § 1601(a). One protection available to consumers under TILA is a right of rescission in any consumer credit transaction in which a security interest is acquired in property used as the principal dwelling of the person to whom credit is extended; this “buyer’s remorse” provision extends for three business days following consummation of the transaction or delivery of the relevant disclosures to the consumer.6 15 U.S.C. § 1635(a). TILA requires that creditors clearly and conspicuously disclose information regarding the right to rescind and provide borrowers with appropriate forms to exercise this right. 15 U.S.C. § 1635(a). Where a creditor fails to make the required 6 Eastern also argued before the federal district court that the Estebans had failed to state a TILA claim because the Property at issue was not their principal dwelling. While the Estebans’ complaint in the federal case stated that the Property was their principal dwelling, the attached loan application stated the Property would be used for investment purposes and their primary residence was on O#ahu. The federal district court found it unnecessary to decide whether the Property was in fact the Estebans’ principal dwelling. Based on our holding that res judicata prohibits the assertion of TILA rescission rights, we likewise do not find it necessary to address this issue. 8 FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER disclosures under TILA, the act extends the borrower’s right to rescind for three years after consummation of the subject transaction.7 15 U.S.C. § 1635(f). The Estebans’ attempt to rescind occurred within this three-year time limit, but after a state court judgment foreclosing on the subject Property. In order to determine 7 Regulation Z, issued by the Federal Reserve Board, implements TILA’s requirements and describes the right of rescission as follows: The consumer may exercise the right to rescind until midnight of the third business day following the occurrence described in paragraph (a)(1) of this section that gave rise to the right of rescission, delivery of the notice required by paragraph (b) of this section, or delivery of all material disclosures, whichever occurs last. If the required notice and material disclosures are not delivered, 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. . . . 12 C.F.R. § 226.15(a)(3) (emphasis added). This court previously described the contours of TILA’s requirements and remedies in Hawaii Community Federal Credit Union v. Keka, 94 Hawai#i 213, 11 P.3d 1 (2000), where we explained: [] TILA requires creditors to provide borrowers with clear and accurate disclosures of terms dealing with things like finance charges, annual percentage rates of interest, and the borrower’s rights. Failure to satisfy TILA subjects a lender to criminal penalties for noncompliance, . . . as well as to statutory and actual damages traceable to a lender’s failure to make the requisite disclosures . . . . Going beyond these rights to damages, TILA also authorizes a borrower whose loan is secured with his principal dwelling, and who has been denied the requisite disclosures, to rescind the loan transaction entirely, until midnight of the third day following the consummation of the transaction or the delivery of the information and rescission forms required under this section together with a statement containing the material disclosures required under this subchapter, whichever is later. TILA provides, however, that the borrower’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, even if the required disclosures have never been made. TILA gives a borrower no express permission to assert the right of rescission as an affirmative defense after the expiration of the 3-year period. 94 Hawai#i at 223, 11 P.3d at 11 (internal citations, quotation marks, and brackets omitted). 9 FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER whether the circuit court erred in confirming sale of the Property, this court must determine whether Hawai#i res judicata law barred the Estebans from asserting a rescission claim after the circuit court’s Foreclosure Judgment became final.