C.F.R. » Title 12 » CHAPTER X—CONSUMER FINANCIAL PROTECTION BUREAU › PART 1026—TRUTH IN LENDING (REGULATION Z) › Subpart C—Closed-End Credit

12 C.F.R. § 1026.23

Right of rescission

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(a) Consumer's right to rescind. (1) In a credit transaction 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 the transaction, except for transactions described in paragraph (f) of this section. For purposes of this section, the addition to an existing obligation of a security interest in a consumer's principal dwelling is a transaction. The right of rescission applies only to the addition of the security interest and not the existing obligation. The creditor shall deliver the notice required by paragraph (b) of this section but need not deliver new material disclosures. Delivery of the required notice shall begin the rescission period.

(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, when filed for telegraphic transmission or, if sent by other means, when delivered to the creditor's designated place of business.

(3)(i) The consumer may exercise the right to rescind until midnight of the third business day following consummation, delivery of the notice required by paragraph (b) of this section, or delivery of all material disclosures, whichever occurs last. If the required notice or material disclosures are not delivered, the right to rescind shall expire 3 years after consummation, 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.

(ii) For purposes of this paragraph (a)(3), the term “material disclosures” means the required disclosures of the annual percentage rate, the finance charge, the amount financed, the total of payments, the payment schedule, and the disclosures and limitations referred to in §§ 1026.32(c) and (d) and 1026.43(g).

(4) When more than one consumer in a transaction has the right to rescind, the exercise of the right by one consumer shall be effective as to all consumers.

(b)(1) Notice of right to rescind. In a transaction 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 be on a separate document that identifies the transaction and shall clearly and conspicuously disclose the following:

(i) The retention or acquisition of a security interest in the consumer's principal dwelling.

(ii) The consumer's right to rescind the transaction.

(iii) How to exercise the right to rescind, with a form for that purpose, designating the address of the creditor's place of business.

(iv) The effects of rescission, as described in paragraph (d) of this section.

(v) The date the rescission period expires.

(2) Proper form of notice. To satisfy the disclosure requirements of paragraph (b)(1) of this section, the creditor shall provide the appropriate model form in appendix H of this part or a substantially similar notice.

(c) Delay of creditor's performance. Unless a consumer waives the right of rescission 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 the rescission period has expired and the creditor is reasonably satisfied that the consumer has not rescinded.

(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.

(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 refinancing or consolidation by the same creditor of an extension of credit already secured by the consumer's principal dwelling. The right of rescission shall apply, however, to the extent the new amount financed exceeds the unpaid principal balance, any earned unpaid finance charge on the existing debt, and amounts attributed solely to the costs of the refinancing or consolidation.

(3) A transaction in which a state agency is a creditor.

(4) An advance, other than an initial advance, in a series of advances or in a series of single-payment obligations that is treated as a single transaction under § 1026.17(c)(6), if the notice required by paragraph (b) of this section and all material disclosures have been given to the consumer.

(5) A renewal of optional insurance premiums that is not considered a refinancing under § 1026.20(a)(5).

(g) Tolerances for accuracy—(1) One-half of 1 percent tolerance. Except as provided in paragraphs (g)(2) and (h)(2) of this section:

(i) The finance charge and other disclosures affected by the finance charge (such as the amount financed and the annual percentage rate) shall be considered accurate for purposes of this section if the disclosed finance charge:

(A) Is understated by no more than 1/2 of 1 percent of the face amount of the note or $100, whichever is greater; or

(B) Is greater than the amount required to be disclosed.

(ii) The total of payments for each transaction subject to § 1026.19(e) and (f) shall be considered accurate for purposes of this section if the disclosed total of payments:

(A) Is understated by no more than 1/2 of 1 percent of the face amount of the note or $100, whichever is greater; or

(B) Is greater than the amount required to be disclosed.

(2) One percent tolerance. In a refinancing of a residential mortgage transaction with a new creditor (other than a transaction covered by § 1026.32), if there is no new advance and no consolidation of existing loans:

(i) The finance charge and other disclosures affected by the finance charge (such as the amount financed and the annual percentage rate) shall be considered accurate for purposes of this section if the disclosed finance charge:

(A) Is understated by no more than 1 percent of the face amount of the note or $100, whichever is greater; or

(B) Is greater than the amount required to be disclosed.

(ii) The total of payments for each transaction subject to § 1026.19(e) and (f) shall be considered accurate for purposes of this section if the disclosed total of payments:

(A) Is understated by no more than 1 percent of the face amount of the note or $100, whichever is greater; or

(B) Is greater than the amount required to be disclosed.

(h) Special rules for foreclosures—(1) Right to rescind. After the initiation of foreclosure on the consumer's principal dwelling that secures the credit obligation, the consumer shall have the right to rescind the transaction if:

(i) A mortgage broker fee that should have been included in the finance charge was not included; or

(ii) The creditor did not provide the properly completed appropriate model form in appendix H of this part, or a substantially similar notice of rescission.

(2) Tolerance for disclosures. After the initiation of foreclosure on the consumer's principal dwelling that secures the credit obligation:

(i) The finance charge and other disclosures affected by the finance charge (such as the amount financed and the annual percentage rate) shall be considered accurate for purposes of this section if the disclosed finance charge:

(A) Is understated by no more than $35; or

(B) Is greater than the amount required to be disclosed.

(ii) The total of payments for each transaction subject to § 1026.19(e) and (f) shall be considered accurate for purposes of this section if the disclosed total of payments:

(A) Is understated by no more than $35; or

(B) Is greater than the amount required to be disclosed.

[76 FR 79772, Dec. 22, 2011, as amended at 78 FR 30745, May 23, 2013; 78 FR 60440, Oct. 1, 2013; 82 FR 37769, Aug. 11, 2017]
Notes of Decisions
Cited in 51 cases (31 in the last 5 years), 2012–2026 · leading case: Alan Keiran v. Home Capital, Inc., 858 F.3d 1127 (8th Cir. 2017).
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Alan Keiran v. Home Capital, Inc., 858 F.3d 1127 (8th Cir. 2017). · cites it 4× “Required disclosures must be made to “each consumer whose ownership interest is or will be subject to the security interest” and must include two copies of a notice of the right to rescind, see 12 C.F.R. § 1026.23 (a), (b)(1), and a TILA disclosure statement, outlining: the…”
Union Sav. Bank v. Schaefer, 2013 Ohio 5704 (Ohio Ct. App. 2013). · cites it 7× “" 12 C.F.R. 1026.23(a)(3)(i). {¶ 26} Here, Schaefer's complaint asserted multiple violations of TILA and sought both enforcement of his right to rescind and damages.”
Rosenfield v. HSBC Bank, USA, 681 F.3d 1172 (10th Cir. 2012). “§ 1635 (f) and 12 C.F.R. § 1026.23 (a)(2) in finding that a borrower had “exercised [the] right to rescind” under TILA by transmitting a notice of rescission within the applicable statutory time period.”
Gilbert v. Residential Funding LLC, 678 F.3d 271 (4th Cir. 2012). “12 C.F.R. § 1026.23 (a)(2). Taking the plain meaning of these texts, and assuming that the words say what they mean and mean what they say, we come to the conclusion that the Gilberts exercised them right to rescind with the April 5, 2009, letter.”
U.S. Bank Nat. Assn as Tr. v. Naifeh, 1 Cal. App. 5th 767 (Cal. Ct. App. 2016). “(§ 1635(1); see 12 C.F.R. § 1026.23 (a)(3)(i) (2016).) To exercise the right of rescission, the consumer must notify the creditor of his or her intention to rescind “by mail, telegram or other means of written communication.”
Elayne Wolf v. Fed. Nat'l Mortg., 512 F. App'x 336 (4th Cir. 2013). “In support of her TILA claim, Wolf also alleges that the lender failed to accurately disclose her right to rescind the loan.”
Smith v. Wells Fargo Bank, N.A., 666 F. App'x 84 (2d Cir. 2016). “” 12 C.F.R. § 1026.23 (b)(1)(v). The parties agree that, on March 9, 2012, Smith received from Wells Fargo a “Close at Home Mortgage Kit” that included rescission forms advising her that her rescission period would expire on “3/29/12,” three business days from “the date of the…”
Denise Otto v. Wells Fargo Bank NA, 693 F. App'x 161 (3rd Cir. 2017). “Lastly, she seeks restitution under 12 C.F.R. § 1026.23 on the basis that the defendants ignored the rescission.”
Larry Jesinoski v. Countrywide Home Loans, Inc., 729 F.3d 1092 (8th Cir. 2013). · cites it 2× “See 12 C.F.R. § 1026.23 (a)(2). COLLOTON, Circuit Judge, concurring.”
Mavis Hartman v. Brian Smith, 734 F.3d 752 (8th Cir. 2013). · cites it 2× “See 12 C.F.R. § 1026.23 (a)(2). I note three additional points: -17- First, although TILA does not provide an express statute of limitations for borrowers to sue for rescission, the statute does provide an express statute of limitations for borrowers to sue for damages.”
Wells Fargo Bank, N.A. v. Caldrello, 192 Conn. App. 1 (Conn. App. Ct. 2019). “Even taking this fact in the light most favorable to the defendant—that the closing agent is an agent of the plaintiff and the closing documents are material disclosures as defined by 12 C.F.R. § 1026.23 (a) (3) (ii)—the defendant’s claim is still barred by 15 U.”
Larry Jesinoski v. Countrywide Home Loans, Inc., 883 F.3d 1010 (8th Cir. 2018). “" 12 C.F.R. 1026.23(a)(3)(i) ; see also 15 U.”
Show all 51 citing cases →
— 12 C.F.R. § 1026.23(a)(1) — 3 cases
McCrae v. Better Way Wholesale Autos, Inc. (D. Conn. 2024).
Love v. Mile One Auto Grp. (D. Maryland 2023).
Robinson v. Guzman (S.D.N.Y. 2023).
— 12 C.F.R. § 1026.23(a)(3)(i) — 3 cases
Union Sav. Bank v. Schaefer, 2013 Ohio 5704 (Ohio Ct. App. 2013). “" 12 C.F.R. 1026.23(a)(3)(i). {¶ 26} Here, Schaefer's complaint asserted multiple violations of TILA and sought both enforcement of his right to rescind and damages.”
Larry Jesinoski v. Countrywide Home Loans, Inc., 883 F.3d 1010 (8th Cir. 2018). “" 12 C.F.R. 1026.23(a)(3)(i) ; see also 15 U.”
Hoang v. Bank of Am., N.A. (W.D. Wash. 2021).
— 12 C.F.R. § 1026.23(b)(1) — 3 cases
Union Sav. Bank v. Schaefer, 2013 Ohio 5704 (Ohio Ct. App. 2013). “" 12 C.F.R. 1026.23(a)(3)(i). {¶ 26} Here, Schaefer's complaint asserted multiple violations of TILA and sought both enforcement of his right to rescind and damages.”
Love v. Mile One Auto Grp. (D. Maryland 2023).
Robinson v. Guzman (S.D.N.Y. 2023).
— 12 C.F.R. § 1026.23(f) — 1 case
Union Sav. Bank v. Schaefer, 2013 Ohio 5704 (Ohio Ct. App. 2013). “" 12 C.F.R. 1026.23(a)(3)(i). {¶ 26} Here, Schaefer's complaint asserted multiple violations of TILA and sought both enforcement of his right to rescind and damages.”
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