US Laws, Codes, Statutes & Cases

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[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
  January 24, 2002 and December 19, 2002]
[CITE: 15USC1635]

 
                      TITLE 15--COMMERCE AND TRADE
 
                 CHAPTER 41--CONSUMER CREDIT PROTECTION
 
              SUBCHAPTER I--CONSUMER CREDIT COST DISCLOSURE
 
                       Part B--Credit Transactions
 
Sec. 1635. Right of rescission as to certain transactions


(a) Disclosure of obligor's right to rescind

    Except as otherwise provided in this section, in the case of any 
consumer credit transaction (including opening or increasing the credit 
limit for an open end credit plan) in which a security interest, 
including any such interest arising by operation of law, is or will be 
retained or acquired in any property which is used as the principal 
dwelling of the person to whom credit is extended, the obligor shall 
have the right to rescind the transaction until midnight of the third 
business 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, by notifying the 
creditor, in accordance with regulations of the Board, of his intention 
to do so. The creditor shall clearly and conspicuously disclose, in 
accordance with regulations of the Board, to any obligor in a 
transaction subject to this section the rights of the obligor under this 
section. The creditor shall also provide, in accordance with regulations 
of the Board, appropriate forms for the obligor to exercise his right to 
rescind any transaction subject to this section.

(b) Return of money or property following rescission

    When an obligor exercises his right to rescind under subsection (a) 
of this section, he is not liable for any finance or other charge, and 
any security interest given by the obligor, including any such interest 
arising by operation of law, becomes void upon such a rescission. Within 
20 days after receipt of a notice of rescission, the creditor shall 
return to the boligor any money or property given as earnest money, 
downpayment, or otherwise, and shall take any action necessary or 
appropriate to reflect the termination of any security interest created 
under the transaction. If the creditor has delivered any property to the 
obligor, the obligor may retain possession of it. Upon the performance 
of the creditor's obligations under this section, the obligor shall 
tender the property to the creditor, except that if return of the 
property in kind would be impracticable or inequitable, the obligor 
shall tender its reasonable value. Tender shall be made at the location 
of the property or at the residence of the obligor, at the option of the 
obligor. If the creditor does not take possession of the property within 
20 days after tender by the obligor, ownership of the property vests in 
the obligor without obligation on his part to pay for it. The procedures 
prescribed by this subsection shall apply except when otherwise ordered 
by a court.

(c) Rebuttable presumption of delivery of required disclosures

    Notwithstanding any rule of evidence, written acknowledgment of 
receipt of any disclosures required under this subchapter by a person to 
whom information, forms, and a statement is required to be given 
pursuant to this section does no more than create a rebuttable 
presumption of delivery thereof.

(d) Modification and waiver of rights

    The Board may, if it finds that such action is necessary in order to 
permit homeowners to meet bona fide personal financial emergencies, 
prescribe regulations authorizing the modification or waiver of any 
rights created under this section to the extent and under the 
circumstances set forth in those regulations.

(e) Exempted transactions; reapplication of provisions

    This section does not apply to--
        (1) a residential mortgage transaction as defined in section 
    1602(w) of this title;
        (2) a transaction which constitutes a refinancing or 
    consolidation (with no new advances) of the principal balance then 
    due and any accrued and unpaid finance charges of an existing 
    extension of credit by the same creditor secured by an interest in 
    the same property;
        (3) a transaction in which an agency of a State is the creditor; 
    or
        (4) advances under a preexisting open end credit plan if a 
    security interest has already been retained or acquired and such 
    advances are in accordance with a previously established credit 
    limit for such plan.

(f) Time limit for exercise of right

    An obligor'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, except that if (1) any agency empowered to enforce the 
provisions of this subchapter institutes a proceeding to enforce the 
provisions of this section within three years after the date of 
consummation of the transaction, (2) such agency finds a violation of 
this section, and (3) the obligor's right to rescind is based in whole 
or in part on any matter involved in such proceeding, then the obligor's 
right of rescission shall expire three years after the date of 
consummation of the transaction or upon the earlier sale of the 
property, or upon the expiration of one year following the conclusion of 
the proceeding, or any judicial review or period for judicial review 
thereof, whichever is later.

(g) Additional relief

    In any action in which it is determined that a creditor has violated 
this section, in addition to rescission the court may award relief under 
section 1640 of this title for violations of this subchapter not 
relating to the right to rescind.

(h) Limitation on rescission

    An obligor shall have no rescission rights arising solely from the 
form of written notice used by the creditor to inform the obligor of the 
rights of the obligor under this section, if the creditor provided the 
obligor the appropriate form of written notice published and adopted by 
the Board, or a comparable written notice of the rights of the obligor, 
that was properly completed by the creditor, and otherwise complied with 
all other requirements of this section regarding notice.

(i) Rescission rights in foreclosure

                           (1) In general

        Notwithstanding section 1649 of this title, and subject to the 
    time period provided in subsection (f) of this section, in addition 
    to any other right of rescission available under this section for a 
    transaction, after the initiation of any judicial or nonjudicial 
    foreclosure process on the primary dwelling of an obligor securing 
    an extension of credit, the obligor shall have a right to rescind 
    the transaction equivalent to other rescission rights provided by 
    this section, if--
            (A) a mortgage broker fee is not included in the finance 
        charge in accordance with the laws and regulations in effect at 
        the time the consumer credit transaction was consummated; or
            (B) the form of notice of rescission for the transaction is 
        not the appropriate form of written notice published and adopted 
        by the Board or a comparable written notice, and otherwise 
        complied with all the requirements of this section regarding 
        notice.

                    (2) Tolerance for disclosures

        Notwithstanding section 1605(f) of this title, and subject to 
    the time period provided in subsection (f) of this section, for the 
    purposes of exercising any rescission rights after the initiation of 
    any judicial or nonjudicial foreclosure process on the principal 
    dwelling of the obligor securing an extension of credit, the 
    disclosure of the finance charge and other disclosures affected by 
    any finance charge shall be treated as being accurate for purposes 
    of this section if the amount disclosed as the finance charge does 
    not vary from the actual finance charge by more than $35 or is 
    greater than the amount required to be disclosed under this 
    subchapter.

               (3) Right of recoupment under State law

        Nothing in this subsection affects a consumer's right of 
    rescission in recoupment under State law.

                          (4) Applicability

        This subsection shall apply to all consumer credit transactions 
    in existence or consummated on or after September 30, 1995.

(Pub. L. 90-321, title I, Sec. 125, May 29, 1968, 82 Stat. 153; Pub. L. 
93-495, title IV, Secs. 404, 405, 412, Oct. 28, 1974, 88 Stat. 1517, 
1519; Pub. L. 96-221, title VI, Sec. 612(a)(1), (3)-(6), Mar. 31, 1980, 
94 Stat. 175, 176; Pub. L. 98-479, title II, Sec. 205, Oct. 17, 1984, 98 
Stat. 2234; Pub. L. 104-29, Secs. 5, 8, Sept. 30, 1995, 109 Stat. 274, 
275.)


                               Amendments

    1995--Subsec. (h). Pub. L. 104-29, Sec. 5, added subsec. (h).
    Subsec. (i). Pub. L. 104-29, Sec. 8, added subsec. (i).
    1984--Subsec. (e). Pub. L. 98-479 redesignated par. (1) as subsec. 
(e), redesignated subpars. (A), (B), (C), and (D) of par. (1) as pars. 
(1), (2), (3), and (4), respectively, and struck out par. (2) which read 
as follows: ``The provisions of paragraph (1)(D) shall cease to be 
effective 3 years after the effective date of the Truth in Lending 
Simplification Reform Act.''
    1980--Subsec. (a). Pub. L. 96-221, Sec. 612(a)(1), substituted 
provisions relating to the right of rescission until midnight of the 
third business day following the consummation of the transaction or the 
delivery of the information and rescission forms required together with 
the statement containing the material disclosures required under this 
subchapter, whichever is later, for provisions relating to right of 
rescission until midnight of the third business day following the 
consummation of the transaction or the delivery of the required 
disclosures and all other material disclosures required under this part, 
whichever is later.
    Subsec. (b). Pub. L. 96-221, Sec. 612(a)(3), (4), inserted 
provisions setting forth applicability of procedures prescribed by this 
subsection, and substituted ``20'' for ``ten'' in two places.
    Subsec. (c). Pub. L. 96-221, Sec. 612(a)(5), inserted ``information, 
forms, and'' after ``whom''.
    Subsec. (e). Pub. L. 96-221, Sec. 612(a)(6), substituted provisions 
relating to nonapplicability to residential mortgage transactions, 
refinancing or consolidation transactions, etc., for provisions relating 
to nonapplicability to creation or retention of first liens.
    Subsec. (f). Pub. L. 96-221, Sec. 612(a)(6), substituted provisions 
setting forth duration of right of rescission where the required 
information and forms or other disclosures required under this part have 
not been delivered to the obligor, and exceptions to such term, for 
provisions setting forth duration of right of rescission where the 
required disclosures or any other material disclosures required under 
this part have not been delivered to the obligor.
    Subsec. (g). Pub. L. 96-221, Sec. 612(a)(6), added subsec. (g).
    1974--Subsecs. (a), (b). Pub. L. 93-495, Sec. 404, inserted 
provisions relating to security interest arising by operation of law.
    Subsec. (e). Pub. L. 93-495, Sec. 412, inserted exemption for 
consumer credit transactions where a State agency is the creditor.
    Subsec. (f). Pub. L. 93-495, Sec. 405, added subsec. (f).


                    Effective Date of 1980 Amendment

    Amendment by Pub. L. 96-221 effective on expiration of two years and 
six months after Mar. 31, 1980, with all regulations, forms, and clauses 
required to be prescribed to be promulgated at least one year prior to 
such effective date, and allowing any creditor to comply with any 
amendments, in accordance with the regulations, forms, and clauses 
prescribed by the Board prior to such effective date, see section 625 of 
Pub. L. 96-221, set out as a note under section 1602 of this title.


                    Effective Date of 1974 Amendment

    Amendment by Pub. L. 93-495 effective Oct. 28, 1974, see section 416 
of Pub. L. 93-495, set out as an Effective Date note under section 1665a 
of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 1605, 1610, 1631, 1639, 
1640, 1641, 1649 of this title.