Neil Garfield’s Qixotic TILA Rescission Theory Can Lead Borrowers into HELL

Dear Neil Garfield:

I write in response to your comments at your blog article TILA RESCISSION: The Bottom Line for Now and to correct some of your misapprehensions about the Truth in Lending Act.  First of all, your enumerations made some good points,  But then it made some not so good.  Your main baseless contention is that a borrower has the right to rescind under TILA for any reason or no reason at all after 3 days after consummation of the loan. That is dead wrong, for very good reason – it violates the stated purpose of TILA, AND it abuses honest lenders

Your first problem is myopia.  You said TILA was enacted “to prevent unscrupulous banks from screwing consumer borrowers.”  That is only partly true.  Congress stated the purpose of TILA in 15 USC 1601:

“It is the purpose of this subchapter to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing and credit card practices.”

  1. The first purpose of TILA is to enable consumers to compare credit terms.
  2. The second purpose of TILA is to protect consumers from inaccurate and unfair billing and credit card practices.

Let us review 15 USC 1635, Rescission.  (a) explains the borrower’s 3-day right to cancel and the creditor’s obligation to provide disclosures of that right and rescission forms to each borrower. (b) explains the loan unwinding or rescission process of lien release and mutual tender. (c) acknowledges the rebuttable presumption of disclosures in the event the borrower signed a receipt. (d) empowers the CFPB to modify or waive rights in a borrower financial emergency. (e) exempts  purchase money and certain other loan activities from TILA rescission.  (f) extends the rescission window to 3 years after loan consummation, or until sale of property or one year after final disposition of a rescission dispute by the court. (g) empowers the courts to award the borrower with relief in addition to rescission for creditor violations of TILA. (h) limits rescission on the basis that creditor supplied imperfect forms that still comply with regulations. (i) allows the borrower to rescind in connection with foreclosure.

It is just plain common sense that the 15 USC 1635(a)(b) TILA 3-day right to cancel a consumer loan that puts the family home at risk does not presume that the creditor is trying to screw the borrower.  Rather, it allows the borrower to change his mind if he finds a more attractive loan deal or just gets “buyer remorse.” That comports with and fulfills the first purpose of TILA above.

The 3-year right to rescind fulfills purpose #2 above.  Thus, the right to rescind under 15 USC 1635(f) gets triggered ONLY by a creditor breach of TILA through failure to give the borrower the requisite, timely, and accurate disclosures.  The regulation at 12 CFR 1026.23(a)(3)i cements the principle in the following language:

“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.”

You see, ONLY failure to deliver the required notice of material disclosures TRIGGERS the right to rescind within a repose window of 3 years following loan consummation, as above.

THIS is where Neil Garfield’s humbug TILA rescission theory blows a gasket and hits the skids.  HE thinks the borrower may rescind after 3 days even if the creditor perfectly complied with TILA disclosure requirements.

Thus, Neil Garfield is DEAD WRONG in his assessment of TILA rescission law.  Every court in the land that has ruled in a related TILA rescission case has allowed post-3-day rescission ONLY in the face of a TILA breach.

Don Quixote Tilting
Garfield’s Supreme Battle

Neil Garfield confesses to that reality, of course.  But he says all of those judges got it wrong, and that some day the SCOTUS will vindicate him with an opinion that supports Garfield’s Don Quixote Windmill Tilting Theory of TILA Rescission against creditors who did no wrong.

I have to burst your bubble here, Neil.  THAT will NEVER HAPPEN. NOT EVER. Only a BOZO judge would ever agree with your Don Quixote Windmill Tilting TILA Rescission Theory.

Neil Garfield doesn’t stop there.  He seems to think that TILA rescission applies to purchase money loans, and that borrowers get the right to rescind by mailing a rescission notice way after the 3 year repose window slammed shut, such as 8 years after consummation.  Why?  Because, he asserts that nobody really knows when the loan was consummated because nobody really knows who the lender was, and consummation can happen months or years after the borrower signed the loan documents.

To make it worse, he maintains that the outside-the-window, unjustified rescission deprived the court of jurisdiction because it voided the note and security instrument.

I’m bursting your bubble again, Neil, so take note.  A controversy over a rescission gives the court jurisdiction. Furthermore, TILA rescission statutes 15 USC 1635(b) and (g) BOTH mention court involvement:

“(b) Return of money or property following rescission. …The procedures prescribed by this subsection shall apply except when otherwise ordered by a court.”

“(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.”

And so does Regulation Z at 12 CFR 1026.23(d)(4):

“The procedures outlined in paragraphs (d)(2) and (3) of this section may be modified by court order.”

Quite apparently, the lawyers of Congress and the Executive Branch both anticipated that controversies will arise when a borrower tries to rescind without justification well into the loan period.

Neil Garfield seems to think that the creditor bears the onus of suing to prevent the rescission.  That is not true either. If, after the borrower mails a rescission notice, the creditor who did no wrong refuses to release the lien or tender, the borrower has no choice but to sue or wait till the creditor forecloses to raise the rescission issue.  And the borrower must do that timely, within a year after mailing rescission notice or initiation of foreclosure.  Usually, the borrower stops making payments after mailing the rescission notice, and in due course the creditor forecloses, giving the borrower a chance to bring the rescission to a head.

If the creditor breached TILA and balks at releasing the lien after receiving the borrower’s rescission notice, the borrower can sue for statutory and actual damages.  That is just, for a failure to release the lien prevents the borrower from refinancing in order to tender.  Neil Garfield gets that part right.  And enabling the borrower to refinance for tender constitutes the reason that Congress, in crafting TILA rescission law, reversed the common law tradition requiring the borrower to tender first in a rescission.

Take note, Neil Garfield.  The courts do not punish creditors who can prove perfect compliance with TILA and yet refused to release the lien or tender upon receipt of the notice of rescission more than 3 days after consummation.  The courts punish borrowers, just as the trial court punished the Jesinoskis, by denying their rescission effort because the creditor proved compliance with TILA.

Remember the SCOTUS Jesinoski opinion.  The trial court had not reached the question of a TILA violation because it heeded 8th Circuit precedent that the borrower had to sue within 3 years after consummation, and more than 3 years had passed.  THAT was the question for SCOTUS:  must the borrower sue within 3 years IN ADDITION to mailing notice of intent to rescind within 3 years?  SCOTUS answered NO, and remanded with this language:

“The Jesinoskis mailed respondents written notice of their intention to rescind within three years of their loan’s consummation. Because this is all that a borrower must do in order to exercise his right to rescind under the Act, the court below erred in dismissing the complaint. Accordingly, we reverse the judgment of the Eighth Circuit and remand the case for further proceedings consistent with this opinion. It is so ordered. “

The 8th Circuit and Michigan District courts complied. The trial court explained:

“The United States Supreme Court reversed, holding that a borrower exercising a right to TILA rescission need only provide his lender written notice, rather than file suit, within the 3-year period. Jesinoski v. Countrywide Home Loans, Inc.,___ U.S. ___, 135 S.Ct. 790, 792, 190 L.Ed.2d 650 (2015). The Eighth Circuit then reversed and remanded the case for further proceedings. (Doc. No. 38.) After engaging in discovery, Defendants 959*959 now move for summary judgment.”

The bank filed a motion for summary judgment, and the court opined:

“Because Plaintiffs have failed to point to evidence creating a genuine issue of fact that they could tender the unpaid balance of the loan in the event the Court granted them rescission, their TILA rescission claim fails as a matter of law on this additional ground… For the reasons discussed above, Plaintiffs’ TILA claim fails as a matter of law. Without a TILA violation, Plaintiffs cannot recover statutory damages based Defendants refusal to rescind the loan. 1. Defendants’ Motion for Summary Judgment (Doc. No. [51]) is GRANTED. 2. Plaintiffs’ Amended Complaint (Doc. No. [7]) is DISMISSED WITH PREJUDICE.”

You see, Neil, courts have very good REASON for disagreeing with your Quixotic theory of rescission: it makes no sense to allow borrowers to rescind loans after disbursement of funds in the absence of a TILA violation or fraud in the transaction.  Anyone understands this who has read the TILA opening statement of purpose which I recited above.

Let’s get to the real bone of contention here.  I flat don’t care whether you ballyhoo foolish, frivolous, and failing legal theories such as your notions about unjustified TILA rescission.  If you were an old farmer yakking about it with other farmers over a game of dominoes as you pass around a jug of cider, it wouldn’t matter at all.

But, Neil, YOU are not ME!  I could get away with such nonsense, but YOU CANNOT!

You pass yourself off as an authority in the LAW, a learned man, someone whose legal opinions people should heed.  And yet you know that because courts rule against your quixotic idea of TILA rescission, anybody who propounds your delusional theory will LOSE, at the cost of many thousands of dollars in fees (his own and his adversaries’), and then will lose his house to foreclosure if he tried to rescind wrongfully, such as after 8 years or in the face of no TILA violation.

Here’s the shame of your method.  You shamelessly promote your TILA Rescission Package for $3000 or thereabout.  After reading your theory a person would have to be an idiot to pay 25 cents for it, much less three grand.  Sadly, such idiots abound, I guess.  Otherwise, why do you continue to promote the package.

Don’t you worry that someone might report you to the Florida Bar for knowingly violating competence, diligence, and candor requirements?

Bob Hurt
Mortgage Attack

On 2018-02-14 08:25, Livinglies’s Weblog wrote:

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One thought on “Neil Garfield’s Qixotic TILA Rescission Theory Can Lead Borrowers into HELL”

  1. Former U.S. Supreme Court Chief Justice Warren E. Burger said: “Seventy-five percent of all American lawyers are incompetent, dishonest or both.” Neil Garfield is obviously one of those seventy-five percent.

    First, the easiest point to make against Neil Garfield’s specious arguments and more proof he doesn’t understand the most basic principles of law and appellate procedure, is that he doesn’t understand what “remand” means. When the SCOTUS “remands” it simply means that their decision did not completely dispose of the case. If they had ruled based on the delusional views of Neil Garfield, the decision would have read something like “reversed and the case is dismissed.”

    Second, his preposterous claim that “100% of lawyers for the banks and servicers agree” with his nonsense, is as far from the truth it can get. Most competent lawyers, to include bank and servicer lawyers, think Neil Garfield’s arguments are ludicrous at best.

    Lastly, I could waste my time and prove his 11 points are mostly laughable, but that’s not necessary. There was a bankruptcy case POST Jesinoski, IN RE BROWN, 538 B.R. 714, 721 (Bankr. E.D. Va. 2015), wherein the court dismissed her Chapter 13, and found her TILA arguments ridiculous. That decision was summarily affirmed in a per curiam opinion by the Fourth Circuit. BROWN v. GORMAN, 680 F. App’x 242, 243 (4th Cir. 2017). Brown appealed the Fourth Circuit’s affirmance to the Supreme Court, which denied her petition for a writ of certiorari on October 2, 2017. See BROWN v. GORMAN, No. 16-1899 (S. Ct. Oct. 2, 2017). So if anything, by denying cert, the SCOTUS believes Garfield’s arguments are ridiculous, as well.

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