True or False: The right of rescission applies only to closed-end loans.

True or False: The right of rescission applies only to closed-end loans.

• A. True
• B. False
• C. Only to open-end loans
• D. Only to home equity lines

Answer: (B)

The assertion that the right of rescission applies only to closed-end loans is false. The right of rescission, as established under the Truth in Lending Act (TILA), allows borrowers a specific period to cancel certain types of credit transactions, particularly those secured by their principal dwelling. This right applies primarily to certain transactions involving home equity loans or lines of credit, including both closed-end and open-end loans. Closed-end loans include traditional mortgage loans, whereas open-end loans refer to revolving credit arrangements, such as home equity lines of credit (HELOCs). The important aspect of rescission is that it typically concerns the borrower's right to cancel transactions that involve their primary residence for both loan types. Thus, understanding that the right of rescission is not limited to closed-end loans but is applicable to both open-end and closed-end credit secured by a borrower's primary dwelling helps clarify why the correct answer is false.

The assertion that the right of rescission applies only to closed-end loans is false. The right of rescission, as established under the Truth in Lending Act (TILA), allows borrowers a specific period to cancel certain types of credit transactions, particularly those secured by their principal dwelling.

This right applies primarily to certain transactions involving home equity loans or lines of credit, including both closed-end and open-end loans. Closed-end loans include traditional mortgage loans, whereas open-end loans refer to revolving credit arrangements, such as home equity lines of credit (HELOCs). The important aspect of rescission is that it typically concerns the borrower's right to cancel transactions that involve their primary residence for both loan types.

Thus, understanding that the right of rescission is not limited to closed-end loans but is applicable to both open-end and closed-end credit secured by a borrower's primary dwelling helps clarify why the correct answer is false.