Describe the "right of rescission" established by the Truth in Lending Act (TILA).

Question

What will be an ideal response?

Answer 1

One of the most significant protections established by the Truth in Lending Act (TILA) is the buyer's (debtor's) right to cancel a credit transaction (purchase on credit). The TILA provides a cancellation right, technically called a "right of rescission," for three business days after the purchase on credit or after such time as the creditor makes the required disclosure. The right is limited to cases in which the debtor's home is used as collateral but does not apply to first mortgages that finance the purchase or construction of a home. The creditor must give the purchaser written notice of the right to cancel. If the purchaser cancels, he also must give notice in writing. A typical example of the kind of transaction in which the debtor has the right to cancel is major home repair or remodeling on credit. Consumers who purchase a furnace or carpeting for their home have the same right if the lender takes a security interest or lien on the home. The cancellation right can be waived under certain circumstances.