Seventh Circuit Holds Courts Can Require Up-Front Tender In TILA Rescission Cases

TILA

On May 28, the U.S. Court of Appeals for the Seventh Circuit affirmed a district court’s holding that required two borrowers who prevailed on their TILA rescission claims to tender the amounts advanced to them before requiring the banks to release their security interests. Iroanyah v. Bank of Am., No. 13-1382, 2014 WL 2198562 (7th Cir. May 28, 2014). After becoming delinquent on two mortgage loans and facing foreclosure actions, the borrowers filed suit, prevailing on their rescission and certain statutory claims but failing on other statutory claims. The district court ruled that the borrowers would be required to return the enumerated tender amounts prior to requiring the banks to release their security interests. On appeal, the Seventh Circuit held that this was a proper exercise of discretion under TILA. The court explained that “rescission is a process involving two parties, each with their own obligations” and that “[t]ender is inherently part of rescission, not an occasional effect of it.” The court joined the First, Fourth, and Eighth Circuits in holding that “a borrower’s inability to satisfy his tender obligations may make rescission . . . impossible.” Further, the court held that the district court did not abuse its discretion when it refused to allow the borrowers to repay in installments over the life of the original loans and instead required them to tender in 90 days.