15 U.S.C. §§ 1635, 1640
Truth in Lending Act: one year for damages, three years to rescind — by letter, not lawsuit
A federal claim in United States district courts · Last verified August 26, 2026
The Truth in Lending Act carries two clocks that do different jobs, and confusing them costs people their homes.
One year to sue for damages over a bad disclosure. Three years to rescind a mortgage — and rescinding means mailing a letter, not filing a lawsuit. Courts got that second point wrong for years until the Supreme Court settled it unanimously in 2015, and it remains the most widely misstated rule in consumer credit law.
What the claim is
A lender failed to disclose credit terms the way the statute requires, or failed to give you the notice of your right to cancel on a loan secured by your home.
Two separate remedies follow, and they are not alternatives so much as different machines:
- Damages for a disclosure violation — the APR, the finance charge, the amount financed, the payment schedule.
- Rescission of certain home-secured loans, which unwinds the transaction and voids the security interest.
Rescission is the powerful one, and it is also the narrower one.
Where the right comes from
Express, in two separate provisions: one creating civil liability for damages, the other creating the right to rescind consumer credit secured by the borrower's principal dwelling.
Disclosure liability is close to strict. A creditor that fails to make a required, accurate disclosure is liable whether or not anyone was misled and whether or not anyone was harmed.
What a plaintiff has to prove
For damages: that the creditor failed to make a required disclosure, or made it inaccurately. For the enumerated core disclosures, that is the whole case — no reliance, no injury requirement.
For rescission: that the loan is a covered transaction, and that a disclosure defect extended the ordinary cancellation window. Every borrower gets three business days to cancel a qualifying home-secured loan for any reason. If the lender failed to deliver the required notice of that right, or botched the material disclosures, the window stretches to three years.
How long you have to file
Two clocks. Learn both.
Damages: one year from the violation. Some circuits allow a discovery rule or equitable tolling; certain mortgage servicing provisions carry three years. The default is one.
Rescission: three years from consummation. And this is not an ordinary limitations period. It is a substantive statute of repose that extinguishes the right itself. In Beach v. Ocwen Federal Bank the Court held the right cannot be asserted after three years even defensively — a borrower facing foreclosure in year four cannot raise rescission as a shield. It cannot be equitably tolled.
What has to happen before you file
Nothing — and that is precisely the point people miss.
To preserve rescission you must, within three years of consummation, notify the creditor in writing that you are rescinding. You do not have to file suit within those three years.
In Jesinoski v. Countrywide Home Loans (2015) the Court held unanimously that the statute's "unequivocal terms" — a borrower "shall have the right to rescind … by notifying the creditor" — "leave no doubt that rescission is effected when the borrower notifies the creditor," and that the statute "does not also require him to sue within three years." Several circuits had held the opposite, and borrowers lost homes on that reading.
Character of the three-year period: neither jurisdictional nor a claim-processing rule. It is the outer boundary of a substantive right, and mailing the notice inside it is what matters. A later suit to enforce a timely-noticed rescission is governed by the ordinary limitations period.
Practical consequence: send the notice, in writing, and keep proof of mailing.
Who can be sued — and who cannot
The creditor. Also assignees, but only in limited circumstances — an assignee is generally liable for a damages violation only where it is apparent on the face of the loan documents. That protects the secondary mortgage market and defeats many claims against whoever holds the note now.
Rescission does not reach every home loan. It is limited to consumer credit secured by the borrower's principal dwelling, and it expressly excludes residential mortgage transactions — loans to acquire or construct the home — and certain refinancings by the same creditor with no new money advanced.
So: a purchase-money mortgage is not rescindable. A cash-out refinance or a home equity loan may be. That distinction eliminates a large share of prospective claims immediately.
Common defenses
Time bar — one year, or three years.
Exempt transaction — purchase-money mortgage, business-purpose credit, credit above the statutory threshold that is not dwelling-secured.
The disclosures were accurate, or fell within the statutory tolerances.
Bona fide error, for unintentional errors resulting from a bona fide error despite procedures reasonably adapted to avoid them.
Assignee non-liability, where the violation is not apparent on the documents.
Failure to tender, discussed below.
What the claim pays
Statutory damages, in bands set by the transaction type:
| Transaction | Statutory damages |
|---|---|
| Closed-end loan secured by real property or a dwelling | twice the finance charge, not less than $400 nor more than $4,000 |
| Consumer lease | not less than $200 nor more than $2,000 |
| Other open-end plans | $500 to $5,000 |
Plus actual damages, costs, and reasonable attorney's fees for a prevailing borrower.
Class actions are capped at the lesser of $1,000,000 or 1% of the creditor's net worth.
Rescission is not a damages remedy at all — it unwinds the loan. The security interest becomes void, the borrower is relieved of finance and other charges, and the statute sets a sequence: the creditor returns money and property and releases the lien; the borrower tenders the principal.
That last step is the catch. Rescission does not give the borrower a free house. Courts routinely condition rescission on the borrower's ability to tender, and a borrower who cannot repay the principal often cannot obtain rescission in practice — the right exists, but the remedy is conditioned.
What people get wrong
"I have to file suit within three years to rescind." No. Written notice suffices, under Jesinoski. This is the single most misstated rule in this area, and older sources are unreliable on it.
"The three-year rescission period can be tolled." No, under Beach. It extinguishes the right.
"I can raise rescission as a defense to foreclosure in year five." No — not even defensively.
"Rescission means I keep the house and owe nothing." No. You must tender the principal.
"Any mortgage can be rescinded." No. Purchase-money mortgages are excluded.
"Whoever holds my loan now is liable for the original lender's mistake." Usually only if the violation is apparent on the face of the documents.
Where it came from
TILA was enacted in 1968 as part of the Consumer Credit Protection Act. Its premise was disclosure rather than substantive regulation: lenders could charge what the market allowed, provided borrowers could compare offers on a standard footing. The APR exists because of this statute.
The rescission right was included specifically for loans putting a home at risk — a three-day cooling period, extended to three years where the lender failed to say the right existed.
Later amendments layered on mortgage-specific disclosure timing, and Dodd-Frank moved rulemaking to the Consumer Financial Protection Bureau and raised the class-action cap from $500,000 to $1,000,000.
Beach and Jesinoski are the two decisions that define how rescission works — the first holding the right expires absolutely, the second holding it is exercised by a letter.
Common questions
Do I have to file a lawsuit within three years to rescind my mortgage?
No. You must notify the creditor in writing within three years of closing. The Supreme Court held unanimously in Jesinoski v. Countrywide Home Loans that suit is not required inside that window.
Can the three-year rescission deadline be extended?
No. It is a substantive repose period that extinguishes the right, and it cannot be equitably tolled — nor raised as a defense after it runs.
How long do I have to sue for a disclosure violation?
One year from the violation for damages, though some circuits permit tolling and certain mortgage servicing claims carry three years.
Can I rescind the mortgage I used to buy my house?
Generally no. Rescission excludes residential mortgage transactions used to acquire or construct the dwelling. It is aimed at refinances, home equity loans, and similar credit secured by a home you already own.
If I rescind, do I still owe the money?
Yes. Rescission voids the security interest and relieves you of finance charges, but you must tender the principal. Courts often condition rescission on your ability to do so.