What is the "right of rescission" under the Truth in Lending Act?

What is the "right of rescission" under the Truth in Lending Act?

• A. Borrowers can defer payments for one year
• B. Borrowers have the right to cancel a home equity loan within three business days
• C. Borrowers can appeal loan terms for any reason
• D. Borrowers receive a lower interest rate after one year

Answer: (B)

The "right of rescission" under the Truth in Lending Act gives borrowers the ability to cancel a home equity loan or a refinance of a primary residence within three business days of signing the loan documents. This provision is crucial because it provides consumers with a safeguard, allowing them to reconsider their decision after the initial excitement of securing a loan. It ensures that borrowers have time to reflect on their agreement, helping to protect them from buyer's remorse or potential predatory lending practices. This right is specifically applicable to certain types of transactions, particularly those involving the borrower's principal residence, which is intended to prevent consumers from being rushed into a financial commitment without fully understanding the implications. The three-day period starts after the borrower receives the required disclosure forms and the right to cancel notice. The other options do not accurately reflect the provisions set forth by the Truth in Lending Act concerning the right of rescission. One speaks to deferring payments, another discusses appealing loan terms, and the last refers to receiving a lower interest rate after a year, none of which relate to the immediate right to cancel centered around home equity loans.

The "right of rescission" under the Truth in Lending Act gives borrowers the ability to cancel a home equity loan or a refinance of a primary residence within three business days of signing the loan documents. This provision is crucial because it provides consumers with a safeguard, allowing them to reconsider their decision after the initial excitement of securing a loan. It ensures that borrowers have time to reflect on their agreement, helping to protect them from buyer's remorse or potential predatory lending practices.

This right is specifically applicable to certain types of transactions, particularly those involving the borrower's principal residence, which is intended to prevent consumers from being rushed into a financial commitment without fully understanding the implications. The three-day period starts after the borrower receives the required disclosure forms and the right to cancel notice.

The other options do not accurately reflect the provisions set forth by the Truth in Lending Act concerning the right of rescission. One speaks to deferring payments, another discusses appealing loan terms, and the last refers to receiving a lower interest rate after a year, none of which relate to the immediate right to cancel centered around home equity loans.