## Facts

- Martha Rodash obtained a home equity loan secured by her principal residence to pay for medical treatment.
- On January 18, 1991, she signed a $102,000 promissory note payable to AIB Mortgage Company and a mortgage securing the note.
- AIB assigned the mortgage to Empire of America Realty Credit Corporation the same day.
- At closing, Rodash received (1) a Truth-in-Lending disclosure statement, (2) a settlement statement, (3) a notice of right to cancel stating a three-day rescission period, and (4) a combined “Acknowledgment of Receipt of Notice of Right to Cancel and Election Not to Cancel.”
- Rodash signed the preprinted “Election Not to Cancel” portion at closing.
- The settlement statement treated certain charges as part of the “amount financed,” including: a $22 Federal Express delivery charge, a $204 Florida intangible tax, and a $6 assignment fee.
- Rodash stopped making payments as of July 1, 1991.
- On December 26, 1991, Rodash sent written notice purporting to rescind the loan under the Truth in Lending Act (TILA) and sought cancellation of the security interest.
- Empire accelerated the loan and filed a state foreclosure action; Rodash filed a federal action seeking rescission and statutory damages for TILA violations.
- The district court granted summary judgment to the lenders; Rodash appealed.

## Issues

1. Whether providing a combined acknowledgment-and-“election not to cancel” form at closing, signed at closing, failed to clearly and conspicuously disclose the three-day right to rescind under TILA and Regulation Z.
2. Whether the $22 Federal Express charge was a “finance charge” that had to be included in the disclosed finance charge and APR rather than in the amount financed.
3. Whether the Florida intangible tax and related charges were improperly treated in a way that produced inaccurate finance-charge disclosures, constituting material TILA violations extending the rescission period.

## Decision

- The Eleventh Circuit reversed the district court’s summary judgment for the defendants and remanded.
- The court held the combined acknowledgment/waiver form was misleading and did not clearly disclose the rescission right because it effectively solicited a waiver at closing.
- The court held the $22 Federal Express fee was incident to the extension of credit and therefore a finance charge that should have been disclosed as such.
- The court concluded the challenged charges produced materially inaccurate disclosures, extending Rodash’s right to rescind to three years.
- Rodash’s December 1991 notice of rescission was timely and effective.

## Legal Principles

- In a consumer credit transaction secured by the borrower’s principal dwelling, TILA requires clear and conspicuous disclosure of the right to rescind; a creditor’s intent is irrelevant if the disclosure’s effect is confusing or misleading to the consumer.
- A waiver of the three-day rescission right is permitted only for a bona fide personal financial emergency and must be made by a separate, dated, written statement from the consumer describing the emergency.
- A “finance charge” includes charges payable directly or indirectly by the consumer and imposed directly or indirectly by the creditor as an incident to, or condition of, extending credit; misclassifying such charges as “amount financed” can render required disclosures inaccurate.
- Material disclosure errors regarding rescission rights or the cost of credit extend the rescission period from three business days to three years and support rescission and statutory remedies.

## Conclusion

The court held that misleading rescission documents and inaccurate finance-charge disclosures violated TILA, extended the borrower’s rescission right to three years, and required reversal of summary judgment for the lenders with further proceedings on rescission and statutory relief.


Rodash v. AIB Mortg. Co., 16 F.3d 1142 (11th Cir. 1994)