Right of Rescission/Right to Cancel

The Right to Cancel or the Right of Rescission is a right given to borrowers within Regulation Z of the Truth in Lending Act. Sometimes known as a "cooling off period," the right of rescission gives borrowers of certain types of loans three business days (in some cases three years) to cancel the loan and to receive a full refund on any money they've already paid up front. It's an extremely important right, and one that every borrower should be aware of in advance of signing loan papers.

At the Bank Fraud Victim Center, we strive to make sure consumers are informed of their rights before they get into trouble. In this current refinancing frenzy, for instance, it's easy to get overexcited about reducing your mortgage payments and fall prey to a bad lender. Regulation Z and the Right of Rescission lets you take a couple of days to make sure your decision is the right one.

The Right of Rescission also applies to personal loans you may agree to that use your home as collateral. The law gives you that crucial extra time to reconsider the loan or to even consider other options for financing. It's equally important to know that the Right of Rescission does not apply in the case of loans for purchasing or building your primary residence, or when you're refinancing with the lender who currently holds the mortgage on your home.

The following is a list of fees and finance charges and refunds that the broker must comply with. You will also be able to keep all funds transferred into your account and if the broker pays off your old mortgage you get free clear title.

Rescission Fees Credit

  1. Finance Charges including all Finance Charges already accrued;

  2. All closing costs;

  3. Security interest charges; Even if it is part of the amount financed as opposed to a finance charge;

  4. All other charges incurred for the actual credit transaction;

  • Application fees

  • Membership fees

  • Commitment fees

  • Appraisal fees

  • Survey fees

  • Broker fees

  • Credit report fees

  • Filing fees

  • Title search fees

  • Attorney fees

5.  Any money given as earnest money, down payment or otherwise;

6.  Credit any payment made on the entire loan;

7.  All cost incurred outside of the credit transaction must be refunded or else they become an actual damage.


See an example right to cancel form.


Failure to comply is automatic violation; 15 USC ยง 1640 with $200.00 to $2000.00 penalty per violation at courts discretion depending on severity of the liability.

Consumer protection laws are out there, but as you can see, they don't protect everyone in every case. To learn more about your rights and you legal options if you need them, contact the Bank Fraud Victim Center today. Simply fill out our free preliminary audit form below or call us at 401-349-4717. You can also email our friendly staff at

 We're here to help you stay protected.





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