Pacific Shore Funding v. Lozo (April 27, 2006, 2nd Dist) 2006 WL 1102696

A year after refinancing a loan they had obtained from Pacific Shore Funding, the Plaintiffs attempted to rescind the original loan transaction on the grounds that Pacific Shore had violated various disclosure requirements of the Truth In Lending Act. The Plaintiffs wanted to rescind the original transaction in order to be refunded transactional up-front fees and costs. The trial court granted Pacific Shore's summary judgment motion ruling that once having refinanced their first loan, the Plaintiffs had nothing left to rescind.

The appeals court held that the borrowers are not precluded from rescinding a consumer credit transaction that subject to TILA merely because they have already refinanced that loan. The court held that a single violation of the Truth in Lending Act, whether it be substantive or technical, extends a borrower's period for rescission. (The extension is from 3 business days to 3 years, by statute) A refinance does not return a borrower to the status quo because they had lost out on fees and costs of the transaction, plus a prepayment penalty.