Pamela D. Simmons

Ten years ago, I represented the borrower in a case that stemmed from a title company’s failure to secure a loan on all of the borrower’s land. (The title company had listed only one of several parcels of land and the lender was unable to non-judicially foreclose on the property as a result.) The complaint had already been filed, and listed among the many causes of action was one entitled “Violation of Reg Z.” One day an attorney for one of the defendants asked me: “What is this Reg Z? I’ve never even heard of it.” So began my love affair with the Federal Truth in Lending Act.

Most attorneys know the Federal Truth in Lending Act (TILA) as the group of laws requiring certain disclosures about the cost of borrowing money. You have seen the disclosures every time you have received a new credit card. Many readers may also be aware that consumers who are borrowing against their homes have a three-day right to cancel the transaction—another feature of TILA. However, few real estate attorneys know that TILA’s right to cancel can last for as long as three years after the loan is made. Moreover, under certain circumstances, TILA can govern individual lenders making a first loan secured by residential property. And even fewer practitioners know that the cost of rescission to the lender is all of the interest, fees, costs, and any other charges not directly for the benefit of the borrower.

I have personally seen the loss to the lender exceed $280,000. In this article I will discuss the history of TILA, describe rescission (its most important provision), and offer some tips on avoiding its pitfalls and attorney malpractice.

TILA – What You Don’t Know Can Hurt You