Truth in Lending Act rescission rights apply when which scenario occurs?

Truth in Lending Act rescission rights apply when which scenario occurs?

• A. The consumer’s principal dwelling is used for a purchase lien on a car
• B. The consumer grants a lien on a vacation home
• C. The consumer’s personal belongings are pledged as collateral
• D. A non-purchase lien or security interest is taken in the consumer’s principal dwelling

Answer: (D)

Under TILA, the right of rescission applies to loans that are secured by the consumer’s principal dwelling, but only when the loan is not used to purchase the dwelling itself. In practice, this means you have a window to cancel a loan like a home equity loan or a refinance that places a lien on the main home, because it’s a non-purchase security interest on that dwelling. Why this fits the scenario: placing a non-purchase lien or security interest on the consumer’s principal dwelling is exactly the kind of loan TILA intends to cover—it's a loan secured by the home after purchase, not the initial purchase loan itself. The other scenarios involve collateral that isn’t the principal dwelling or involve a purchase-money loan, which is exempt from rescission. So rescission rights apply in the case of a non-purchase lien on the principal dwelling.

Under TILA, the right of rescission applies to loans that are secured by the consumer’s principal dwelling, but only when the loan is not used to purchase the dwelling itself. In practice, this means you have a window to cancel a loan like a home equity loan or a refinance that places a lien on the main home, because it’s a non-purchase security interest on that dwelling.

Why this fits the scenario: placing a non-purchase lien or security interest on the consumer’s principal dwelling is exactly the kind of loan TILA intends to cover—it's a loan secured by the home after purchase, not the initial purchase loan itself. The other scenarios involve collateral that isn’t the principal dwelling or involve a purchase-money loan, which is exempt from rescission. So rescission rights apply in the case of a non-purchase lien on the principal dwelling.