In a recent decision, the Tenth Circuit upheld TILA
§1635(f) as a statute of repose that acts to extinguish the
right of a consumer to claim the affirmative defense of rescission
three years after the consummation of a loan transaction. In
Rosenfield v. HSBC Bank,1 Ms. Rosenfield appealed a
decision handed down by the United States District Court for the
District of Colorado dismissing her claims for declaratory and
injunctive relief for HSBC's alleged violations of
TILA.2 Ms. Rosenfield claimed that by sending written
notice to HSBC of her intent to rescind but doing nothing more, she
had met the requirements of §1635(f).
In 2006, Ms. Rosenfield applied for and closed on a refinance
loan on her home. The loan was subsequently sold or assigned
to HSBC. Ms. Rosenfield believed that her original lender had
violated TILA by omitting required disclosures regarding rescission
rights, adjustable rates, and finance charges. A little less
than two years after her loan closed, Ms. Rosenfield sent HSBC a
"Notice of Rescission to the lender," which purported to
effectively rescind the loan transaction at issue. She
received no response from HSBC regarding her notice. On July
9, 2009, HSBC instituted foreclosure proceedings pursuant to Rule
120 of the Colorado Rules of Civil Procedure ("Rule 120")
in the District Court for the City and County of Denver. In
response to HSBC's action, Ms. Rosenfield asserted the defense
of rescission, which the state court held was unavailable to her in
the "pared down" proceedings established under Rule
120. On December 21, 2009, Ms. Rosenfield commenced an action
in state court, requesting declaratory and injunctive relief
against HSBC. HSBC successfully removed the suit to the U.S.
District Court for the District of Colorado.
The Tenth Circuit was presented with two related questions
– whether Ms. Rosenfield properly exercised her statutory
right to rescind under §1635(f)'s three year statutory
time bar either by (1) sending written notice to HSBC of her intent
to rescind and thereafter receiving no response or (2) asserting a
defense of rescission during a Colorado Rule 120
proceedings. The Tenth Circuit held that §1635(f)
requires both a notice of intent to rescind and filing of suit to
assert a rescission right within the three year statutory time bar.
Accordingly, Ms. Rosenfield had not met the properly exercised her
statutory right. In reaching its decision, the Tenth Circuit
examined Beach v. Ocwen Federal Bank,3 the Supreme
Court's most recent decision regarding a consumer's right
to rescission under TILA. In Beach, the Supreme Court held that
§1635(f) governs the life of the underlying right of
rescission, and is therefore not a statute of limitations, but one
of repose in which a consumer's right of rescission is
extinguished three years after the consummation of the transaction
at issue. The Tenth Circuit further noted that per Ms.
Rosenfield's argument, all that would be required of a consumer
pursuant to §1635(f) is transmission of a notice that the
consumer intended to rescind the underlying transaction. Such
a result would lead to unnecessary confusion, in which a creditor
would not have actually acted on a consumer's notice of
intent. Further, the result would lead to an indirect
enlargement of the congressionally established three year time
period and could in fact cloud the title of the property at issue
for an indefinite period of time.
The Tenth Circuit upheld the district court's decision that
allowing Ms. Rosenfield to amend her complaint to fully plead her
Rule 120 argument would not cure the time bar defect that was fatal
to her claim.
The Tenth Circuit's decision follows the decisions of other
circuits4 and comports with a plain reading of
§1635(f). The opinion continues the precedent of
providing creditors protection and predictability related to a
consumer's assertion of their right of rescission pursuant to
1 No. 10-442, 2012 U.S. App. LEXIS 11799, at *1
(10th Cir. June 11, 2012).
2 As noted in the opinion, Ms. Rosenfield's initial
claims also included alleged violations of RESPA and requested
damages. The alleged RESPA violations were note before the
Tenth Circuit on appeal, and Ms. Rosenfield did not renew her claim
for damages upon the district court's dismissal of the claim as
3 523U.S. 410 (1998).
4 See, e.g., McOmie-Gray v. Bank of Am., 667 F.3d 1325,
1328 (9th Cir. 2012); Williams v. Wells Fargo Home
Mortg., Inc., 410 F. App'x 495, 498-99 (3d Cir. 2011);
Sobieniak v. BAC Home Loans Servicing, LP, __F. Supp. 2d __, 2011
WL 6122318, at *4 (D. Minn. Dec. 8, 2011).
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