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NoncomplianceA lender that fails to comply with the act maybe subject to criminal liability and may be requiredto compensate the borrower in a civil action broughtby the borrower. The Truth in Lending Act alsostates that a borrower whose loan is secured by theborrower’s principal dwelling may rescind the loanagreement if the lender fails to deliver requiredforms or accurately disclose important terms of thetransaction. Upon such rescission, the borrower “isnot liable for any finance or other charges, and anysecurity interest (mortgage) given by [him] . . . becomesvoid,” and the lender must “return to the [borrower]any money or property” paid by theborrower. The right to rescind usually terminatesthree years after the date of the loan or when theproperty is sold, whichever is sooner.Time LimitationsAlthough more than three years had passedsince the date of the loan, the Beaches argued thatthey could still exercise their right of rescissionbecause it was brought in theform of an affirmative defense tothe bank’s mortgage foreclosureaction. The Court was not persuadedby this argument. Afterreviewing the act, the Court concludedthat Congress intendedthat the right to rescind expirethree years after the date ofthe loan, regardless of thecircumstances.The Court expressed that“Section 1635(f) [of the Truth inLending Act], however, takesbeyond any question whether itlimits more than the time forbringing a suit, by governing thelife of the underlying right as well.The subsection says nothing interms of bringing an action but instead providesthat ‘the right of rescission [under the Act] shallexpire’ at the end of the time period. It talks not ofa suit’s commencement but a right’s duration,which it addresses in terms so straightforward asto render any limitation on the time for seeking aremedy superfluous.”Holding The Court concluded that Congressintended that the act permits “no federal right torescind, defensively or otherwise, after the 3-yearperiod of §1635(f) has run” and affirmed the judgmentof the Supreme Court of Florida. As a resultof the Court’s decision, a borrower in a consumercredit transaction cannot rescind the loan agreementsecured by the borrower’s home more than threeyears after the date of the loan, even if the lenderfailed to deliver required forms to the borrower orfailed to accurately disclose important terms of thetransaction as governed by the federal truth-inlendinglaw.1. What was Congress’s purpose in adopting theTruth in Lending Act?2. To what types of loans does the Truth inLending Act apply?3. What information must a lender provide to theborrower in a transaction subject to the Truthin Lending Act?4. What are the consequences a lender may faceif it does not comply with the disclosurerequirements of the Truth in Lending Act?5. During what time period may a borrowerusually exercise the right to rescissionauthorized under the Truth in Lending Act?Go to the Understanding Business and Personal Law Web site at ubpl.glencoe.comfor information about how to access online resources for the Landmark Cases.Chapter 26: Collecting Negotiable Instruments 579