During an advertising approval, a branch supervisor identifies an issue involving TILA right of rescission. Which response is most compliant?

Correct Answer

B) Recognize rescission applies to covered principal-dwelling security interests

Why this is correct: The Truth in Lending Act (TILA) grants a right of rescission for certain transactions. The core concept is that this right applies specifically to credit transactions where a security interest is taken in the consumer's principal dwelling. The correct answer directly states this governing rule: rescission applies to covered principal-dwelling security interests. This is the fundamental fact a supervisor must recognize to ensure compliance. Why the other choices are wrong: The choice "Treat the TILA Right of Rescission review as complete because the file contains a related PMI cancellation note" is wrong because Private Mortgage Insurance (PMI) cancellation is governed by a different law (the Homeowners Protection Act) and is unrelated to TILA rescission rights. The choice "Wait until a regulator asks for the file before applying the federal requirement" is wrong because compliance with TILA is mandatory and proactive, not something to delay until questioned. The choice "Rely on oral agreement when the rule requires documented compliance" is wrong because TILA rescission rights require specific written disclosures and documented procedures; oral agreements do not satisfy the law. Exam tip: Remember the key trigger for TILA rescission: a security interest in the consumer's principal dwelling. It does not apply to purchase-money mortgages on a new home.