(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, whichever occurs last. If the required
notice and material disclosures are not delivered, the right to rescind
shall expire 3 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. The term material disclosures means the information that must
be provided to satisfy the requirements in section 1026.6 with regard
to the method of determining the finance charge and the balance upon
which a finance charge will be imposed, the annual percentage rate,
the amount or method of determining the amount of any membership or
participation fee that may be imposed as part of the plan, and the
payment information described in section 1026.40(d)(5)(i) and (ii)
that is required under section 1026.6(e)(2).
(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. 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 signature of
all the consumers entitled to rescind. Printed forms for this purpose
are prohibited.
(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.
