Consumer Acknowledgment of Expiration of Rescission Period

Issue/Inquiry

The Bank needs clarification regarding requirements of the “Right to Cancel.”  Is it acceptable to use a faxed copy of the customers’ acknowledgement that they are not rescinding their loan, or is the original signature needed?

Response Summary

Regulation Z only requires the consumer’s signature on the Notice of Right to Cancel when the consumer is terminating the transaction. The Bank, however, must wait until it is reasonably satisfied that the rescission period has expired and that the consumer has not rescinded the transaction before disbursing the loan proceeds. To that end, it is prudent for the Bank to obtain a written statement from the consumer that the right of rescission has not been exercised. Obtaining this statement by electronic facsimile would provide the Bank with the assurance it needs, though it would also be prudent to obtain the signed original of the faxed statement for the Bank’s records.

Response Detail

Under the disclosure requirements of Regulation Z and the model forms it provides, the consumer’s signature on the Notice of Right to Cancel is required only when the consumer is canceling the transaction. 12 CFR §§1026.15(a)(2), 23(a), Appendices G-5, G-6, H-8, and H-9.

Given the requirements of the regulation for providing the Notice of Right to Cancel and for taking no action to disburse the loan proceeds until the rescission period has expired, it would be prudent for the Bank to obtain the consumer’s signature in acknowledgment of both the receipt of the notice and of the expiration of the rescission period. For that reason, the Notice of Right to Cancel forms provided by most software vendors have signature lines for the consumers’ acknowledgment of the receipt of the notice and of the expiration of the rescission period.

With respect to the running of the rescission period, the official commentary to Regulation Z provides the following:

• The creditor must wait until it is reasonably satisfied that the consumer has not rescinded. For example, the creditor may satisfy itself by doing one of the following:
  • Waiting a reasonable time after expiration of the rescission period to allow for delivery of a mailed notice.
  • Obtaining a written statement from the consumer that the right has not been exercised.
• When more than one consumer has the right to rescind, the creditor cannot reasonably rely on the assurance of only one consumer, because other consumers may exercise the right. Official Interpretations, ¶23(c)-4.

Since there is no requirement to obtain the consumer’s signature when the rescission period has expired, though it is prudent to do  so, any reasonable method the Bank adopts to be satisfied that the consumer  has not rescinded the transaction would be acceptable. Obtaining a copy of the Notice of Right to Cancel with the consumer’s signature acknowledging that the rescission period  has expired and that the consumer has not rescinded the transaction would be a reasonable method, as would obtaining the signed statement by electronic facsimile. Obtaining the original signed copy of the faxed statement for the Bank’s records would also be prudent.

This entry was posted on Monday, December 14th, 2015 at 2:00 pm.