What is the "Right of Rescission"?

The "Right of Rescission" refers specifically to the right that consumers have to cancel certain credit transactions within three business days after the transaction is completed. This right is most commonly applicable to certain types of mortgage loans, specifically refinances and home equity loans, under the Truth in Lending Act (TILA) provisions.

This provision ensures that borrowers have an opportunity to reconsider the transaction and to cancel if they choose, which is particularly important since these kinds of transactions involve significant financial commitments and potential impacts on their financial situation.

Having a limited three-business-day timeframe encourages consumers to take swift action if they have a change of heart or feel uncomfortable with the terms upon further reflection. This is a consumer protection mechanism designed to promote informed decision-making and to protect against hastily entered agreements that may not serve the borrower’s best interests.

Other options do not align with the specific rights provided under the Truth in Lending regulations and pertain to different aspects of financial transactions. Modifying loan terms after closing, transferring loan agreements, and disputing credit card charges are separate processes with their own regulations and protections and do not fall under the scope of the Right of Rescission as defined by Regulation Z.