The Truth Shall Set You Free: Explaining Judicial Hostility to the Truth in Lending Act’s Right to Rescind a Mortgage Loan

Abstract

The Supreme Court is entertaining a divide among the federal circuits over whether the federal Truth in Lending Act (TILA) requires a consumer borrower to file a lawsuit in order to exercise her statutory right to rescind, or cancel, certain types of mortgage loans where the lender fails to disclose information mandated by the statute. Many have commented on the appropriate interpretation of the statute and its implementing regulation, but there is a gap in the academic literature addressing the circuit divide. This article goes beyond interpretation of the relevant statute and regulation to explore and consider unarticulated explanations for the majority-held view. That view holds that TILA implicitly requires a consumer borrower to file a lawsuit to exercise her right to rescind even though the statute expressly provides that written notice is sufficient. Five circuits have imposed this requirement even though Congress did not, explaining that they are constrained by Supreme Court precedent. That precedent is clearly inapposite, because the Supreme Court is reviewing an Eighth Circuit ruling on this issue. This article posits that some evolving trend, beyond stare decisis, underlies the majority circuits’ rulings. Among the possibilities the article explores are: (1) the federal judiciary’s interest in regulating consumer litigation behavior; (2) a paradigm shift in agency deference doctrine, including the reconsideration of Seminole Rock/Auer deference; and (3) disagreement with Congress’s liberalization of common law rescission by statute.