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Understanding TILA Violations: Your Right to Rescind and Recover Damages
Published June 23, 2026 · 5 min read
Published June 23, 2026 · 5 min read
The Truth in Lending Act (TILA) is one of the most powerful consumer protection laws available to homeowners. It requires lenders to disclose loan terms clearly — and when they don't, you may have the right to rescind (cancel) the entire loan or recover statutory damages of $400 to $4,000 per violation. At Dream Financial Management, we help identify TILA violations hidden in mortgage documents.
For most refinances and home equity loans, you have 3 business days to cancel. If the lender failed to provide proper notice of this right, the rescission period extends to 3 years. This is the nuclear option — rescinding the entire loan.
Lenders must accurately disclose the finance charge, APR, amount financed, total of payments, and payment schedule. Errors in these disclosures — even small ones — can trigger TILA liability.
Loan originators cannot receive compensation based on loan terms (yield spread premiums). Kickbacks and steering are prohibited. Violations can support a defense against foreclosure.
Failure to provide two copies of the Notice of Right to Cancel at closing
Understating the finance charge or APR by more than the tolerance ($100 or 0.125%)
Improperly completing the TILA disclosure form — wrong dates, missing signatures, blank boxes
Failing to disclose prepayment penalties or balloon payments
TILA violations can be raised as affirmative defenses in judicial foreclosure cases, or as grounds for a separate lawsuit in non-judicial states to halt a trustee sale. A valid rescission under TILA voids the security interest — meaning the lender cannot foreclose. The lender must return all payments and fees, and you must repay the principal (often negotiated down). See our complete TILA violations guide.
We'll review your closing documents for disclosure errors and evaluate your rescission rights.