1st Cir Again Applies Favorable TILA Rulings to MCCCDA

The U.S. Court of Appeals for the First Circuit recently applied its TILA rulings to Massachusetts law, holding that there was no right to rescind under Massachusetts law where the numerical dates and deadlines in the Notice of Right to Cancel were allegedly inaccurate. The First Circuit also held as untimely Appellants’ request to certify questions construing the Massachusetts Consumer Credit Cost Disclosure Act to the Massachusetts Supreme Judicial Court.


The Appellant-borrowers (“the Borrowers”) obtained a refinance loan from Encore Credit Corp. (“Encore”), which later sold and assigned the loan.

The loan closed a day later than it was originally scheduled, and the loan documents were altered by hand to reflect the date change.

Later, the Borrowers fell behind on their payments. The investor initiated foreclosure proceedings, and rejected the Borrowers’ request torescind the loan. After filing for bankruptcy, the Borrowers sought

rescission under Massachusetts law charging that their mortgage was rescindable, because Encore had allegedly failed to provide the proper closing and rescission dates, and allegedly failed to provide the Borrowers with “high cost home mortgage loan” disclosures under Massachusetts law. Both the bankruptcy court and the United States District Court rejected the Borrowers’ arguments, and the First Circuit affirmed.

Despite the four-year limitations period under the Massachusetts Consumer Credit Cost Disclosure Act, Mass. Gen. Laws ch. 140D, § 10(a) (“MCCCDA”), the Borrowers sought to rescind five years after the closing date, based upon the pending foreclosure. The Borrowers sought to show that the disclosures they received from Encore incorrectly stated the loan closing date, and that the disclosures did not provide the deadline to rescind the loan. To prove that adequate disclosures had been provided in a timely manner, however, the investor submitted copies of the right to cancel forms, which the Borrowers had signed and dated, and which also bore a handwritten date of rescission.

The First Circuit noted that the MCCCDA was patterned on the federal Truth in Lending Act (“TILA”) and that both statutes give consumers the right to rescind a mortgage “until midnight of the third business day following the consummation of the transaction.” Mass. Gen. Laws ch. 140D, § 10(a); 15 U.S.C. § 1635(a). Under the First Circuit’s prior TILA rulings, “technical deficiencies do not matter if the borrower receives a notice that effectively gives him notice as to the final date for rescission and has the three full days to act.” The Court determined that the Borrowers clearly had received adequate notice of their right to cancel under the MCCCDA also.

The Court similarly rejected the Borrowers’ claim that they did not receive state high cost home mortgage loan disclosures. As you may recall, the regulations under the MCCCDA require lenders to print a statement on the loan application above the borrower signature line advising borrowers that the loan being offered may not be the least expensive available and that borrowers should shop around for a better loan. Although the statement was not provided on the Borrowers’ loan application form, it was provided separately at the loan closing. Because the regulations provide that consumers can rescind only within three days of receiving the high cost home loan disclosures, and the Borrowers did not dispute that the warning was provided to them at the time of the loan transaction, Court held that their opportunity to rescind had long expired.

Further, the Court also rejected the Borrowers’ renewed request for certification to the Massachusetts Supreme Judicial Court. The Court noted that the Borrowers had waited until after the bankruptcy court had denied their motion for reconsideration before seeking certification. The Court stated that such an approach “is almost always fatal, unless the court sees strong policy reasons” for certification. The Court also stated that it does not “normally certify cases that depend not on a general rule but on a unique fact configuration” as in this situation.

Finally, the Court held that the Borrowers were not entitled to damages under chapter 93A of the Massachusetts General Laws, because liability for damages hinged on a successful claim for rescission, which was clearly not the case here.