Technical Flaw in Notice to Rescind Did Not Support Longer Period for Rescission

In Melfi v. WMC Mortgage Corp., No. 09-1066, (1st Cir., June 11, 2009) the U.S. Court of Appeals for the First Circuit held that a technical violation of TILA and Regulation Z did not trigger the longer three-year rescission period becuase the documents gave reasonable notice to the borrower that he had three days to rescind the transaction. The borrower argued that, although his documents used the form suggested by the Federal Reserve Board, the notice of his right to rescind was deficient because the spaces for the date of the transaction and the actual deadline to rescind were left blank. The date of the transaction, however, was stamped in the upper right corner of the page, and the notice clearly stated that he had three business days to cancel the transaction. The district court applied the holding from _Palmer v. Champion Mortgage_, 465 F.3d 24 (1st Cir. 2006). In that case, the plaintiff received a notice of her right to cancel that followed the Federal Reserve Board’s model after the rescission deadline listed on the notice. Even so, the First Circuit held that the notice was crystal clear because it included an alternative deadline of three business days following the date that the notice was received. The Court further held that some of the cases finding a blank notice form to be grounds for rescission even though harmless were decided under an earlier version of TILA; noting that in 1995 Congress added a new subsection to TILA which provided that a borrower could not rescind ”solely from the form of written notice used by the creditor . . . if the creditor provided the [borrower] the appropriate form of written notice published and adopted by the Board . . . .” Although this safe harbor provision may not apply directly, the Court held that the TILA amendments were aimed in general to guard against widespread rescissions for minor violations. ”In any event, in the absence of some direction from Congress or the Board to impose a penalty, we see no policy basis for such a result.

Download Related Document