Pub. 6 2015 Issue 1

spring 2015 17 West Virginia Banker of loan consummation. After reviewing TILA, however, the U.S. Supreme Court found no such requirement. According to the Supreme Court, rescission may be affected through a written notice of rescis- sion anytime within the three-year window following loan consummation. Although the long-term implications of Jesinoski remain uncertain, it will make it much easier for consumers to rescind loans secured by their principal dwellings. However, the decision should not be in- terpreted as permitting consumers to walk away from their loans. In order to rescind a mortgage, a borrower must first return the funds received. In addition, the lender retains the ability to defend against the rescission notice if the borrower received the required disclosures. And a borrower must still exercise his rights within three days of closing the loan or receiving prop- er TILA notices, provided the time period does not exceed three years. Following Jesinoski, banks should examine their lend- ing and credit administration practices to identify opportunities to mitigate Jesinoski’s impact on their consumer loan portfolios. Dent v. Regions Bank On January 23, 2015, a federal district court in Georgia held that a non-borrower has standing to assert a rescission claim under TILA. In Dent v. Regions Bank, the plaintiff, whose name did not appear on the note executed by her husband, sought to rescind a loan from Regions Bank based on the TILA rescission provisions. The bank moved to dismiss, arguing that she was not an “obligor” under TILA and therefore lacked standing. The judge denied the motion, finding that although not expressly addressed by Congress or the courts, the Federal Reserve Board’s Regulation Z provided authority to permit the claim. In Dent, the plaintiff and her husband executed a security deed on their home, but only the husband executed the note. Two days after the loan closing, Dent sent a notice to Regions Bank cancelling the loan. Regions Bank sought dismissal of the claim, arguing that the plain meaning of the term “obligor” did not include a person not obligated to pay the debt. The Court disagreed, noting that extending the right of rescission to individuals like Dent was not manifestly contrary to the purpose or language of TILA, and in fact furthered the statute’s purpose. The Court noted that support for its holding could be found in the Federal Reserve Board’s (now CFPB’s) Regulation Z. Although the Court’s holding in Dent has not been adopted by a West Virginia state or federal court, banks should consider the impact of the ruling on their current lending practices. In situations where in- dividuals to a loan transaction pledge their property but do not sign a note, a West Virginia Court could easily find that they deserve the protections afforded by TILA. Rather than risking a lawsuit, banks may want to recognize a rescission claim, particularly if the non-executing party is a spouse that has pledged collateral. n Sandra Murphy concentrates her prac- tice inbanking,commercialandfinancial services and securities law. She can be contacted directly at (304) 347-1131 or via e-mail at smurphy@bowlesrice.com. Make Your Shareholders happY! Use our C&I Program to instantly add loan growth and diversification. Contact your representative today or email to CI@centerstatebank.com 704.496.2612 5960 Fairview Road, Suite 400 Charlotte, NC 28210 www.csbcor respondent.com