Bank Fraud Victims

A Legal Remedy (continued)

 

What Happens Once the Rescission Period is Over?

 

"Advice to Lenders from a licensed auditor"

 

"After the right-of-rescission period has expired, make sure you feel reasonably certain that the consumer has not rescinded before you disburse the loan proceeds.  There are some risks in disbursing after the third day.  For example, the law allows consumers to exercise their rescission rights by mail, and a rescission is effective when mailed.  Thus, a rescission mailed on the third day after closing is effective even though the lender may not receive it until the fourth or fifth day after the closing. Because of this potential timing problem, Regulation Z suggests that lenders take extra precautions to ensure that the loan has not been rescinded."

 

"To avoid further delay of the loan proceeds, you may want to obtain a confirmation statement from all the owners stating that they have not exercised their rescission rights. Such a written confirmation provides written documentation that the transaction has not been rescinded.  Bankers Systems' rescission forms contain this confirmation language, which can be an effective way to resolve the rescission issue quickly."

 

"Note,  however, that owners should not sign this confirmation until after the three day period is over. Otherwise, it may look like they have improperly waived their rescission rights."

What Are The Consequences of Noncompliance For The Lender?

"There are serious consequences for failing to follow the right-of-rescission rules.  First, until a lender provides the material disclosures and the proper Notice of Right to Rescind, the three-business day rescission period does not start to run, and the transaction remains rescindable for up to three years.  And once a consumer rescinds a transaction, the security interest in the property becomes void and you must reimburse the consumer for all of the finance charges collected over the life of the loan."

 

END REPORT

 

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