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U.S. Code as of:
01/19/04
Section 1635. Right of rescission as to certain transactions
(a) Disclosure of obligor's right to rescind
Except as otherwise provided in this section, in the case of any
consumer credit transaction (including opening or increasing the
credit limit for an open end credit plan) in which a security
interest, including any such interest arising by operation of law,
is or will be retained or acquired in any property which is used as
the principal dwelling of the person to whom credit is extended,
the obligor shall have the right to rescind the transaction until
midnight of the third business day following the consummation of
the transaction or the delivery of the information and rescission
forms required under this section together with a statement
containing the material disclosures required under this subchapter,
whichever is later, by notifying the creditor, in accordance with
regulations of the Board, of his intention to do so. The creditor
shall clearly and conspicuously disclose, in accordance with
regulations of the Board, to any obligor in a transaction subject
to this section the rights of the obligor under this section. The
creditor shall also provide, in accordance with regulations of the
Board, appropriate forms for the obligor to exercise his right to
rescind any transaction subject to this section.
(b) Return of money or property following rescission
When an obligor exercises his right to rescind under subsection
(a) of this section, he is not liable for any finance or other
charge, and any security interest given by the obligor, including
any such interest arising by operation of law, becomes void upon
such a rescission. Within 20 days after receipt of a notice of
rescission, the creditor shall return to the boligor any money or
property given as earnest money, downpayment, or otherwise, and
shall take any action necessary or appropriate to reflect the
termination of any security interest created under the transaction.
If the creditor has delivered any property to the obligor, the
obligor may retain possession of it. Upon the performance of the
creditor's obligations under this section, the obligor shall tender
the property to the creditor, except that if return of the property
in kind would be impracticable or inequitable, the obligor shall
tender its reasonable value. Tender shall be made at the location
of the property or at the residence of the obligor, at the option
of the obligor. If the creditor does not take possession of the
property within 20 days after tender by the obligor, ownership of
the property vests in the obligor without obligation on his part to
pay for it. The procedures prescribed by this subsection shall
apply except when otherwise ordered by a court.
(c) Rebuttable presumption of delivery of required disclosures
Notwithstanding any rule of evidence, written acknowledgment of
receipt of any disclosures required under this subchapter by a
person to whom information, forms, and a statement is required to
be given pursuant to this section does no more than create a
rebuttable presumption of delivery thereof.
(d) Modification and waiver of rights
The Board may, if it finds that such action is necessary in order
to permit homeowners to meet bona fide personal financial
emergencies, prescribe regulations authorizing the modification or
waiver of any rights created under this section to the extent and
under the circumstances set forth in those regulations.
(e) Exempted transactions; reapplication of provisions
This section does not apply to -
(1) a residential mortgage transaction as defined in section
1602(w) of this title;
(2) a transaction which constitutes a refinancing or
consolidation (with no new advances) of the principal balance
then due and any accrued and unpaid finance charges of an
existing extension of credit by the same creditor secured by an
interest in the same property;
(3) a transaction in which an agency of a State is the
creditor; or
(4) advances under a preexisting open end credit plan if a
security interest has already been retained or acquired and such
advances are in accordance with a previously established credit
limit for such plan.
(f) Time limit for exercise of right
An obligor's right of rescission shall expire three years after
the date of consummation of the transaction or upon the sale of the
property, whichever occurs first, notwithstanding the fact that the
information and forms required under this section or any other
disclosures required under this part have not been delivered to the
obligor, except that if (1) any agency empowered to enforce the
provisions of this subchapter institutes a proceeding to enforce
the provisions of this section within three years after the date of
consummation of the transaction, (2) such agency finds a violation
of this section, and (3) the obligor's right to rescind is based in
whole or in part on any matter involved in such proceeding, then
the obligor's right of rescission shall expire three years after
the date of consummation of the transaction or upon the earlier
sale of the property, or upon the expiration of one year following
the conclusion of the proceeding, or any judicial review or period
for judicial review thereof, whichever is later.
(g) Additional relief
In any action in which it is determined that a creditor has
violated this section, in addition to rescission the court may
award relief under section 1640 of this title for violations of
this subchapter not relating to the right to rescind.
(h) Limitation on rescission
An obligor shall have no rescission rights arising solely from
the form of written notice used by the creditor to inform the
obligor of the rights of the obligor under this section, if the
creditor provided the obligor the appropriate form of written
notice published and adopted by the Board, or a comparable written
notice of the rights of the obligor, that was properly completed by
the creditor, and otherwise complied with all other requirements of
this section regarding notice.
(i) Rescission rights in foreclosure
(1) In general
Notwithstanding section 1649 of this title, and subject to the
time period provided in subsection (f) of this section, in
addition to any other right of rescission available under this
section for a transaction, after the initiation of any judicial
or nonjudicial foreclosure process on the primary dwelling of an
obligor securing an extension of credit, the obligor shall have a
right to rescind the transaction equivalent to other rescission
rights provided by this section, if -
(A) a mortgage broker fee is not included in the finance
charge in accordance with the laws and regulations in effect at
the time the consumer credit transaction was consummated; or
(B) the form of notice of rescission for the transaction is
not the appropriate form of written notice published and
adopted by the Board or a comparable written notice, and
otherwise complied with all the requirements of this section
regarding notice.
(2) Tolerance for disclosures
Notwithstanding section 1605(f) of this title, and subject to
the time period provided in subsection (f) of this section, for
the purposes of exercising any rescission rights after the
initiation of any judicial or nonjudicial foreclosure process on
the principal dwelling of the obligor securing an extension of
credit, the disclosure of the finance charge and other
disclosures affected by any finance charge shall be treated as
being accurate for purposes of this section if the amount
disclosed as the finance charge does not vary from the actual
finance charge by more than $35 or is greater than the amount
required to be disclosed under this subchapter.
(3) Right of recoupment under State law
Nothing in this subsection affects a consumer's right of
rescission in recoupment under State law.
(4) Applicability
This subsection shall apply to all consumer credit transactions
in existence or consummated on or after September 30, 1995.
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