(a) Consumer’s right to rescind.
(1) (i) Except
as provided in paragraph (a)(1)(ii) of this section, in a credit plan
in which a security interest is or will be retained or acquired in
a consumer’s principal dwelling, each consumer whose ownership interest
is or will be subject to the security interest shall have the right
to rescind: each credit extension made under the plan; the plan when
the plan is opened; a security interest when added or increased to
secure an existing plan; and the increase when a credit limit on the
plan is increased.
(ii) As provided in section 125(e) of the act, the consumer does
not have the right to rescind each credit extension made under the
plan if such extension is made in accordance with a previously established
credit limit for the plan.
(2) To exercise the right to rescind, the
consumer shall notify the creditor of the rescission by mail, telegram,
or other means of written communication. Notice is considered given
when mailed, or when filed for telegraphic transmission, or, if sent
by other means, when delivered to the creditor’s designated place
of business.
(3) The
consumer may exercise the right to rescind until midnight of the third
business day following the occurrence described in paragraph
(a)(1)
of this section that gave rise to the right of rescission, delivery
of the notice required by paragraph (b) of this section, or delivery
of all material disclosures,
36 whichever occurs last. If the required
notice and material disclosures are not delivered, the right to rescind
shall expire three years after the occurrence giving rise to the right
of rescission, or upon transfer of all of the consumer’s interest
in the property, or upon sale of the property, whichever occurs first.
In the case of certain administrative proceedings, the rescission
period shall be extended in accordance with section 125(f) of the
act.
(4) When more than
one consumer has the right to rescind, the exercise of the right by
one consumer shall be effective as to all consumers.
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(b) Notice of right to rescind. In any transaction or occurrence subject to rescission, a creditor
shall deliver two copies of the notice of the right to rescind to
each consumer entitled to rescind (one copy to each if the notice
is delivered in electronic form in accordance with the consumer-consent
and other applicable provisions of the E-Sign Act). The notice shall
identify the transaction or occurrence and clearly and conspicuously
disclose the following:
(1) The retention or acquisition of a security
interest in the consumer’s principal dwelling.
(2) The consumer’s right to rescind, as
described in paragraph (a)(1) of this section.
(3) How to exercise the right to rescind,
with a form for that purpose, designating the address of the creditor’s
place of business.
(4)
The effects of rescission, as described in paragraph (d) of this section.
(5) The date the rescission
period expires.
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(c) Delay of creditor’s performance. Unless
a consumer waives the right to rescind under paragraph (e) of this
section, no money shall be disbursed other than in escrow, no services
shall be performed, and no materials delivered until after the rescission
period has expired and the creditor is reasonably satisfied that the
consumer has not rescinded. A creditor does not violate this section
if a third party with no knowledge of the event activating the rescission
right does not delay in providing materials or services, as long as
the debt incurred for those materials or services is not secured by
the property subject to rescission.
(d) Effects of rescission.
(1) When a consumer rescinds a transaction,
the security interest giving rise to the right of rescission becomes
void, and the consumer shall not be liable for any amount, including
any finance charge.
(2) Within 20 calendar days after receipt of a notice of rescission,
the creditor shall return any money or property that has been given
to anyone in connection with the transaction and shall take any action
necessary to reflect the termination of the security interest.
(3) If the creditor has
delivered any money or property, the consumer may retain possession
until the creditor has met its obligation under paragraph (d)(2) of
this section. When the creditor has complied with that paragraph,
the consumer shall tender the money or property to the creditor or,
where the latter would be impracticable or inequitable, tender its
reasonable value. At the consumer’s option, tender of property may
be made at the location of the property or at the consumer’s residence.
Tender of money must be made at the creditor’s designated place of
business. If the creditor does not take possession of the money or
property within 20 calendar days after the consumer’s tender, the
consumer may keep it without further obligation.
(4) The procedures outlined in paragraphs
(d)(2) and (3) of this section may be modified by court order.
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(e) Consumer’s waiver of
right to rescind.
(1) The consumer may modify or waive the
right to rescind if the consumer determines that the extension of
credit is needed to meet a bona fide personal financial emergency.
To modify or waive the right, the consumer shall give the creditor
a dated written statement that describes the emergency, specifically
modifies or waives the right to rescind, and bears the signatures
of all the consumers entitled to rescind. Printed forms for this purpose
are prohibited, except as provided in paragraph (2) of this section.
(2) The need of the consumer
to obtain funds immediately shall be regarded as a bona fide personal
financial emergency provided that the dwelling securing the extension
of credit is located in an area declared during June through September
1993, pursuant to 42 USC 5170, to be a major disaster area because
of severe storms and flooding in the Midwest.
36a In this instance, creditors
may use printed forms for the consumer to waive the right to rescind.
This exemption to paragraph
(e)(1) of this section shall expire one
year from the date an area was declared a major disaster.
(3) The consumer’s need to
obtain funds immediately shall be regarded as a bona fide personal
financial emergency provided that the dwelling securing the extension
of credit is located in an area declared during June through September
1994 to be a major disaster area, pursuant to 42 USC 5170, because
of severe storms and flooding in the South.
36b In this instance, creditors may use printed forms for the consumer
to waive the right to rescind. This exemption to paragraph
(e)(1)
of this section shall expire one year from the date an area was declared
a major disaster.
(4)
The consumer’s need to obtain funds immediately shall be regarded
as a bona fide personal financial emergency provided that the dwelling
securing the extension of credit is located in an area declared during
October 1994 to be a major disaster area, pursuant to 42 USC 5170,
because of severe storms and flooding in Texas.
36c In this instance,
creditors may use printed forms for the consumer to waive the right
to rescind. This exemption to paragraph
(e)(1) of this section shall
expire one year from the date an area was declared a major disaster.
(f) Exempt transactions. The right to rescind does not apply to
the following:
(1) A residential mortgage transaction.
(2) A credit plan in which
a state agency is a creditor.
