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Financial Services Law Insights and Observations

Ninth Circuit Clarifies TILA Delivery Requirements



The U.S. Court of Appeals for the Ninth Circuit recently held that lender compliance with the Truth In Lending Act’s (TILA) delivery obligation requires that the borrower be permitted to keep written copies of the right-to-rescind notice. Balderas v. Countrywide Bank, N.A., No. 10-55064, 2011 WL 6824977 (9th Cir. Dec. 29, 2011). In this case, the borrowers allege that the lender improperly pressured them into a loan and then refused to grant their request to rescind the loan, which allegedly occurred within the three-day rescission period. The borrowers claim that the lender provided defective copies of the Notice of Right to Cancel, which did not include the closing date or the expiration date for the rescission period. TILA requires that when the rescission notice is provided in writing, as it was in this case, the lender must deliver to the borrower two copies including the rescission expiration date. The district court ruled that a copy of the Notice of Right to Cancel attached to the complaint proved that the rescission notice was delivered to the borrowers, and on that basis dismissed the case. The Ninth Circuit disagreed, holding that the Notice of Right to Cancel in the record proves only that borrowers signed the document possessed by the lender. To “deliver” the notice in compliance with TILA requires a “permanent physical transfer from one party to another”; momentary delivery does not suffice. While the document in the record provides the lender with a rebuttable presumption of delivery, it does not prove that two copies were delivered to the borrowers as required. The court held that the borrowers should be permitted to attempt to rebut the presumption and prove their allegations of improper delivery to a trier of fact.