MEMORANDUM OPINION

T.S. ELLIS, III, District Judge.

At issue in this Truth in Lending Act1 ("TILA") and Fair Debt Collection Practices Act2 ("FDCPA") matter is whether a borrower's TILA rescission claims are time-barred where, as here, the borrower notified the lender that the borrower was exercising his TILA rescission right within three years of closing, but the borrower failed to commence suit to enforce rescission until more than three years after closing.

For the reasons that follow, plaintiffs TILA rescission claim is time-barred and must be dismissed.

I.

The facts pertinent material to the instant motion are undisputed and may be succinctly slated. The procedural history is more complex.

Plaintiff Norman Bradford is a Virginia resident living at 43543 Barley Court in Ashburn. Virginia (the "Ashburn Property"). Bradford's third verified amended complaint names five corporate defendants and one individual defendant, namely (i) HSBC Mortgage Corporation ("HSBC"). (ii) Home Advantage funding Group ("Home Advantage"), (iii) Mortgage Electronic Registration Systems ("MERS"), (iv) Ally Bank ("Ally"), (v) Residential Funding Company ("RFC"), and (vi) Amir Mirza. Mirza is a loan officer for defendant Home Advantage.3 Bradford worked with Mirza and Home Advantage4 to obtain a refinancing loan, which was secured by a deed of trust ("Deed of Trust") naming HSBC as lender and MERS as beneficiary.5 On March 4, 2011, Bradford moved to join Ally as a defendant, believing Ally was the holder of Bradford's promissory note and thus a necessary and indispensable party.6 That motion was granted on March 11, 2011. See Bradford v. HSBC Mortgage Corp., No. 1:09cv1226 (E.D.Va. Mar. 11, 2011) (Order). Subsequently, HSBC submitted an affidavit from an employee of Ally Bank representing that, in fact, RFC was the true holder of Bradford's promissory note, and accordingly, plaintiff was granted leave to join RFC as a defendant.7 See Bradford v. HSBC Mortgage Corp., No. 1:09cv1226 (E.D.Va. May 25, 2011) (Order).

This case arises out of the handling of Bradford's residential refinancing agreement on the Ashburn Property, Bradford's primary residence. Bradford alleges that various TILA violations8 occurred at Bradford's home loan closing on September 20, 2006, the result of which was to extend his TILA rescission period from three days to three years after closing. See 15 U.S.C. § 1635(a); see also 12 C.F.R. § 226.23. On October 16, 2008, Bradford mailed a notice to HSBC indicating that he was exercising his TILA rescission right, after which he ceased making loan payments. HSBC refused to acknowledge Bradford's right to rescission and proceeded with collection activities, including commencing foreclosure.9

On October 29, 2009, Bradford filed the instant action alleging TILA, FDCPA, Real Estate Settlement Procedures Act10 ("RESPA"), breach of fiduciary duty, and fraud claims. HSBC, MERS, and PFC moved to dismiss the complaint, and the motion was granted in part insofar as the RESPA, breach of fiduciary duty, and fraud claims were dismissed pursuant to Rule 12(b)(6), Fed.R.Civ.P. See Bradford v. HSBC Mortgage Corp., No. 1:09cv1226 (E.D.Va. Sept. 20, 2010) (Order). Discovery then proceeded on the remaining FDCPA and TILA claims.

At the conclusion of discovery, the parties—who at that time did not include Ally or RFC—filed cross motions for summary judgment. Bradford established as an undisputed fact on summary judgment that various mandatory TILA disclosures were not provided at the time of closing, such that he was entitled to rescind his loan within the extended statutory three-year period. See 15 U.S.C. § 1635(f) (providing for an extended three-year rescission right where certain disclosures are not made to the borrower at the time of closing). But defendants pointed out that even if Bradford were entitled to rescind his loan, rescission could not be granted because the holder of Bradford's promissory note—who at that lime was unknown—was a necessary and indispensable party for a rescission claim.11 The parties were then granted additional discovery to resolve what should have been a relatively straightforward matter of identifying the current holder of Bradford's promissory note. Yet inexplicably, identifying the noteholder proved quite difficult for these parties.

At first, the parties represented that Ally was the noteholder, and leave was accordingly granted to file a second amended complaint adding Ally as a defendant. See Bradford v. HSBC Mortgage Corp., No. 1:09cv1226 (E.D.Va. Mar. 11, 2011) (Order). After Ally was added as a party, Ally timely moved to dismiss the second amended complaint pursuant to Rule 12(b)(6), Fed.R.Civ.P., and HSBC and MERS joined in Ally's motion. Later, HSBC produced a sworn declaration indicating that RFC is the current noteholder. Accordingly, on May 25, an Order issued granting Bradford leave to amend his complaint solely to add RFC as a defendant so that all necessary and indispensable parties would be joined in this action. See Bradford v. HSBC Mortgage Corp., No. 1:09cv1226 (E.D.Va. May 25, 2011) (Order). Bradford thus filed a third amended complaint that named RFC as a defendant on June 6, 2011. Although the most competent evidence to date12 suggests that RFC is the true current noteholder in this action, HSBC, Ally, and RFC—each of whom apparently held Bradford's promissory note for some period of time after closing—all remain as defendants.

After RFC was added as a party, RFC moved jointly with Ally to dismiss the third amended complaint based on the same arguments raised by Ally in Ally's motion to dismiss the second amended complaint. HSBC and MERS also filed a motion to dismiss the third amended complaint raising many of the same arguments advanced by Ally and RFC, including the argument that the TILA claims are time-barred. See Bradford v. HSBC Mortgage Corp., No. 1:09cv1226 (E.D.Va. Sept. 20, 2010) (Order) (granting in part and denying in part the motion to dismiss). Because Ally and RFC raised new arguments with respect to the limitations period on Bradford's TILA claims, all parties were granted leave to file legal memoranda focusing on (i) whether Bradford's TILA claims are time-barred and (ii) whether dismissal of the TILA claims would result in dismissal of all claims in the third amended complaint. See Bradford v. HSBC Mortgage Corp., No. 1:09cv1226 (E.D.Va. June 17, 2011) (Order).

II.

Dismissal pursuant to Rule 12(b)(6), Fed.R.Civ.P., is appropriate where the complaint does not "contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). It follows that to survive a Rule 12(b)(6) motion to dismiss, a complaint must contain "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Iqbal, 129 S.Ct. at 1949. And, in this respect, it is also true that "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Id. (emphasis added). Thus, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id., quoted in Walker v. Prince George's County, Md., 575 F.3d 426, 431 (4th Cir.2009) (O'Connor, J.). Instead, the complaint must allege facts that, if true, plausibly satisfy each element of the claims for which relief is sought. It is equally well settled that "where facts sufficient to rule on [a statute of limitations] defense are alleged in the complaint, the defense may be reached by a motion to dismiss filed under Rule 12(b)(6)." Goodman v. Praxair, Inc., 494 F.3d 458, 464 (4th Cir.2007). Accordingly, the motions to dismiss must be granted if, on the face of Bradford's complaint, it is clear that Bradford is not entitled to the relief sought because such relief is time-barred.

III.

Defendants argue that Bradford's right to rescission expired three years after the date of loan closing, and thus his TILA rescission claims, which were filed more than three years after closing, are time-barred. Bradford contends that his mailing of a notice of rescission to HSBC within three years of closing satisfied TILA's deadlines, rendering his TILA claims timely. The question presented, therefore, is whether the timeliness of Bradford's action is measured by his mailing of a notice of rescission or by the filing of his suit.

The analysis of this question properly begins with the pertinent TILA provisions. Thus, it is clear that Congress passed TILA "to assure the meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him." 15 U.S.C. § 1601(a). Accordingly, TILA requires a creditor to disclose information at the time the loan is consummated, and it affords certain rights to rescission and damages for violations of these rules. See §§ 1631-1632, 1635, 1637-1640; see also Koons Buick Pontiac GMC, Inc. v. Nigh, 543 U.S. 50, 54, 125 S.Ct. 460, 160 L.Ed.2d 389 (2004) (describing the legislative goals of TILA). And with regard to rescission, TILA provides:

15 U.S.C. § 1635(a); see also 12 C.F.R. § 226.23 ("Regulation Z") ("If the required notice or material disclosures are not delivered, the right to rescind shall expire three years after consummation. . . ."). Taken together, these clauses provide a borrower on a consumer credit transaction the right to rescind the loan agreement within three years of closing if the creditor fails to make the required disclosures under the Act. Regulation Z also provides that "[t]o exercise the right to rescind, the consumer shall notify the creditor of the rescission by mail, telegram, or other means of written communication." 12 C.F.R. § 226.23(a)(3).

Here, Bradford mailed HSBC notice that he was exercising his rescission right within three years of closing, but he did not commence the present action until more than three years had elapsed since closing. At issue here, therefore, is whether Bradford's failure to file his complaint within three years of closing is fatal to his complaint, or whether his mailing notice of rescission to HSBC tolled or otherwise satisfied TILA's three-year deadline for exercising his rescission right.

Bradford contends that, based on a plain reading of the statute and accompanying regulations, a borrower is only required to "exercise" the right of rescission within three years, and that the "exercise" of rescission is complete upon notifying the creditor of the rescission. Defendants, on the other hand, contend that Supreme Court and Fourth Circuit precedent make clear that the borrower must actually file suit to enforce the rescission right within three years or the right is extinguished. Although the Fourth Circuit has not analyzed this issue directly, a review of the pertinent precedent indicates that defendants' interpretation is correct.

In Beach v. Ocwen Federal Bank, 523 U.S. 410, 118 S.Ct. 1408, 140 L.Ed.2d 566 (1998), the Supreme Court addressed whether a borrower could seek rescission more than three years after closing—not, as here, as an affirmative claim—but as a defense in foreclosure proceedings. Beach began by acknowledging the principle that statutes of limitation generally do not prevent parties from asserting defenses that would otherwise be time-barred if brought as offensive claims. Id. at 415, 118 S.Ct. 1408. But the three-year deadline in § 1635(f), the Supreme Court concluded, was not a statute of limitations but a statute of repose, "operat[ing], with the lapse of time, to extinguish the right which is the foundation of the claim." Id. at 416, 118 S.Ct. 1408. The text of § 1635(f) makes clear, according to Beach, that the three-year deadline in § 1635(f) does not pertain to "a suit's commencement but [to the rescission] right's duration, which [the statute] addresses in terms so straightforward as to render any limitation on the time for seeking a remedy superfluous." Id. at 417, 118 S.Ct. 1408. Thus, the Supreme Court held that "§ 1635(f) completely extinguishes the right of rescission at the end of the 3-year period." Id. at 412, 417, 118 S.Ct. 1408. Beach further reasoned that this interpretation "makes perfectly good sense" because absent such a hard-and-fast rule, "a statutory right of rescission could cloud a bank's title on foreclosure." Id. at 418, 118 S.Ct. 1408.

Although Beach is not dispositive here because the borrower in Beach did not submit a notice of rescission to his creditor within three years of closing, as Bradford did here, Beach's discussion of the three year deadline as a statute of repose does provide support for the proposition that the deadline is not subject to tolling. Indeed, in Jones v. Saxon Mortgage, Inc., 537 F.3d 320 (4th Cir.1998). the Fourth Circuit, based on Beach, concluded that the three-year deadline in § 1635(f) is not subject to tolling based on fraudulent inducement. 537 F.3d at 327. The borrower in Jones attempted to exercise rescission after his home was sold at sale, arguing that the defendant's fraudulent concealment tolled the lime limit for seeking rescission. Id. In rejecting this argument, the Fourth Circuit noted that "[b]ecause § 1635(1) is a statute of repose, the time period stated therein is typically not tolled for any reason." Id. (noting that tolling the rescission deadline beyond the date of the foreclosure sale "would create uncertainty in any chain of title").

The Fourth Circuit further analyzed § 1635(f) in American Mortgage Network, Inc. v. Shelton, 486 F.3d 815 (4th Cir. 2007). There, the Fourth Circuit held that "unilateral notification of cancellation [to the creditor] does not automatically void the loan contract"; rather, a home mortgage becomes void only after "the creditor acknowledges that the right of rescission is available, or ... the appropriate decision maker has so determined" that rescission is warranted. Id. at 821. In other words, until rescission is recognized by the lender or the court, a borrower has "only advanced a claim seeking rescission." Id. (quotations and alterations omitted). Shelton makes clear that a borrower's act of sending a rescission notice to his creditor is a necessary, but not a sufficient, step in exercising of one's rescission right. If the creditor does not acknowledge rescission and the borrower fails to pursue his rescission right in court, the mortgage remains fully enforceable just as though the borrower had never sought rescission in the first place.

Although Jones and Shelton do not squarely address the issue presented here, those cases, together with Beach, point persuasively to the conclusion that § 1635(f) imposes an unforgiving deadline on the exercise of a borrower's rescission right. The reason for this hard-and-fast rule is not to reward creditors who ignore valid rescission requests,13 but to ensure that lingering rescission rights do not unnecessarily cloud title, which protects, inter alia, bona fide third party purchasers of homes at foreclosure sales. See DeCosta v. U.S. Bancorp, 2010 WL 3824224, at *5, 2010 U.S. Dist. LEXIS 101873, at *16-17 (D.Md. Sept. 27, 2010) (concluding that basing the rescission deadline on whether the borrower sent a rescission notice "would cloud the lender's title on foreclosure, a problem that Congress likely sought to avoid by passing Section 1635(f)"). Furthermore, allowing a borrower to file a rescission claim more than three years after closing simply because the borrower sent a timely rescission notice to the creditor "would essentially permit borrowers to invoke the very tolling doctrines that the Supreme Court stressed were inapplicable in this context." Id.

All of the district courts in this circuit that have analyzed TILA's three-year rescission deadline have reached the same conclusion reached here,14 but courts across the country are not uniformly in agreement. Indeed, the interpretation of § 1635(f) has led to a three-way split of authority. According to the first group of cases, which includes the district courts in this circuit, a complaint seeking rescission is time-barred if it is not filed within three years of closing regardless of whether the borrower mailed a timely rescission notice to the creditor.15 On the other end of this spectrum of authorities, some cases have held that a rescission action is timely regardless of when it was filed provided the borrower gave the creditor notice of rescission within the three-year period.16 Finally, a third group of cases take what might be described as a middle approach, concluding that sending the creditor notice of rescission satisfies the three-year deadline, and the creditor's failure to respond to a valid notice of rescission in turn triggers the general one-year statute of limitations for TILA violations, 15 U.S.C. § 1640(e).17

Based on the precedent in Beach, Jones, and Shelton, it is appropriate to join with the other district courts in this circuit and conclude that the three-year time limit on TILA rescission is absolute, the expiration of which extinguishes the borrower's rescission right regardless of whether any notice of rescission was filed within three years of closing. Indeed, analysis of the two alternative views demonstrates that neither view conforms with Beach and the binding precedent in this circuit. As for the view that a rescission action is always timely, no matter when it is filed, provided the borrower gave the creditor notice of rescission within three years of closing, this conclusion is directly at odds with the Supreme Court's decision in Beach. Beach recognized TILA's rescission deadline as a statute of repose intended by Congress to avoid unnecessarily clouding a bank's title at foreclosure. Beach, 523 U.S. at 418, 118 S.Ct. 1408. A view of the statute that provides no outer limit on the filing of a rescission action would carve out an exception to the statute of repose that would swallow the rule.

As for the more moderate interpretation of TILA—that sending notice of the right to rescission triggers a separate one-year statute of limitations for rescission claims—careful analysis reveals that this interpretation is equally Hawed. In adopting this view, the District Court for the District of Columbia in Johnson relied on the fact that § 1635(b) sets forth specific obligations for a creditor after receiving notice of rescission. 451 F.Supp.2d at 40. Specifically, § 1635(b) requires that "[w]ithin 20 days after receipt of a notice of rescission, the creditor shall return to the obligor any money or property ... and shall take any action necessary or appropriate to reflect the termination of any security interest." Based on those provisions, Johnson concluded that the failure of a creditor to proceed as given in § 1635(b) constitutes a separate TILA violation subject to the general one-year statute of limitations provided in 15 U.S.C. § 1640. id. Cases like Johnson can be construed in one of two ways, with each logical path carrying its own unique flaws. On the one hand, such cases could be construed as holding that submitting a notice of rescission tolls the three-year deadline of § 1635(1). But as the Fourth Circuit has indicated, statute of reposes are not subject to tolling. See Jones, 537 F.3d at 327. On the other hand, one could construe cases like Johnson as distinguishing two different TILA rescission claims, one under § 1635(f) and one under § 1635(b), each with a different limitations period. Under that view, a borrower could bring a § 1635(f) action for rescission outright within three years of closing, or the borrower could demand rescission from the lender and then, within a year of the notice to the lender, bring a § 1635(b) action to enforce the creditor's duty to acknowledge and effect rescission. Neither holding is persuasive.

There is no reason to conclude that Congress would draft TILA so as to provide a borrower with two rescission claims, each with a different limitations period, but both for the purpose of achieving the same remedy under the same statute based on the same underlying statutory rescission right. First, such a construction would lead to anomalous results that are inconsistent with Congress's legislative purpose in ensuring clear title in residential home transactions. Cf. See Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 575, 102 S.Ct. 3245, 73 L.Ed.2d 973 (1982) ("[I]nterpretations of a statute which would produce absurd results are to be avoided if alternative interpretations consistent with the legislative purpose are available."). Second, and more importantly, this construction of the statute would create an exception to the three-year statute of repose for TILA claims based on the general, catch-all statute of limitations for TILA violations, a construction that violates the "elementary tenet of statutory construction that where there is no clear intention otherwise, a specific statute will not be controlled or nullified by a general one." Guidry v. Sheet Metal Workers Nat'l Pension Fund, 493 U.S. 365, 375, 110 S.Ct. 680, 107 L.Ed.2d 782 (1990) (quotations and ellipsis omitted). It follows that the appropriate construction of TILA is that § 1635's statute of repose for rescission claims specifically carves out an exception to § 1640's one-year statute of limitations period for TILA claims generally. Thus, the catch-all, one-year statute of limitations for TILA claims does not apply to rescission claims.

In sum, it is appropriate to conclude that a borrower must bring an action to enforce the TILA rescission right within three years of closing regardless of whether the borrower submits timely notice of rescission to the creditor prior to the end of the three-year period. Here, because Bradford filed this action on October 29, 2009, more than three years after his home loan closed on September 20, 2006, his rescission action is time-barred. Therefore, Bradford's TILA claims must be dismissed.

With respect to the dismissal of the TILA claims, Bradford raises one final procedural issue that merits attention. Essentially, Bradford notes that some of the defendants, namely HSBC and MERS, already raised the timeliness issue in an earlier motion to dismiss—albeit cursorily.18 The September 20, 2010 Order on defendants' motion to dismiss, inter alia, rejected defendants' argument that Bradford's rescission claims were untimely. See Bradford v. HSBC Mortgage Corp., No. 1:09cv1226 (E.D.Va. Sept. 20, 2010) (Order) (denying defendant's motion to dismiss as to the TILA claims). Accordingly, Bradford argues that the decision with respect to the timeliness of Bradford's rescission claims is law of the case and binds all parties, including subsequently-joined defendants such as Ally and RFC.

Bradford's argument concerning law of the case is fundamentally misguided. As the Fourth Circuit has noted:

Am. Canoe Ass'n v. Murphy Farms, Inc., 326 F.3d 505, 515 (4th Cir.2003). Regardless of whether HSBC and MERS adequately addressed the timeliness issue in their original motions to dismiss, and even though dismissal of the TILA claims was previously denied, HSBC and MERS are entitled to the benefit of a correct interpretation of the pertinent statutory time bars for TILA rescission claims. To the extent the September 20 Order is inconsistent with this Order, the earlier Order is overruled here.

IV.

It remains to determine which claims, if any, survive the conclusion that Bradford's rescission claims are time-barred. Defendants argue that because Bradford is not entitled to rescission, the remaining claims in the complaint, all of which arise under the FDCPA, must be dismissed because they are contingent on recognizing Bradford's rescission right. Defendants are correct as to all remaining claims except for a single FDCPA claim.

The FDCPA imposes civil liability on a "debt collector" who engages in certain prohibited debt collection practices. See 15 U.S.C. § 1692k(c), Bradford alleges that defendants violated the FDCPA (i) by attempting to collect on a properly rescinded mortgage loan; (ii) by making false or incomplete reports to credit reporting agencies, inasmuch as defendants reported that Bradford did not make payments on a loan that had already been rescinded; (iii) by attempting to foreclose on a rescinded security interest; (iv) by attempting to foreclose on a rescinded note; and (v) by attempting to foreclose on a note of which they were not in possession. Am. Compl. ¶ 86.

As an initial matter, Bradford does not contest, and therefore essentially concedes, that his complaint does not allege any basis for FDCPA claims against MERS;19 accordingly, it is appropriate to dismiss MERS. As to defendants HSBC, Ally, and RFC, the first four of the FDCPA claims enumerated supra arise out of the central premise that Bradford validly rescinded his loan. That is, Bradford claims that because his loan was validly rescinded, defendants' attempts to collect on the loan after rescission were tantamount to collecting on a debt that was not owed. Because Bradford's rescission claim fails, those four FDCPA claims must be dismissed as well.

The final FDCPA claim—namely, that defendants attempted to foreclose based on a note they did not then possess—does not depend on Bradford's rescission claim. Essentially, Bradford contends that each defendant engaged in foreclosure efforts without regard to whether the given defendant had actual possession or ownership of the Note at the time. The contention is based in part on the fact—which apparently is not in dispute—that Bradford's Note was transferred at least twice since its issuance: first from HSBC to Ally, and second from Ally to RFC. If a defendant transferred the Note, or did not yet have possession or ownership of the Note at the time, but nevertheless engaged in foreclosure efforts, that conduct could amount to an FDCPA violation. Therefore, because the complaint adequately sets forth a claim that that HSBC, Ally, and/or RFC violated the FDCPA by attempting to foreclose on the Note without possession, the claim cannot be dismissed under Rule 12(b)(6), Fed.R.Civ.P. Instead, it is appropriate to convert Ally and RFC's motion to dismiss to a motion for summary judgment as to this sole remaining claim and to grant all parties20 leave to file supporting legal memoranda and factual contentions concerning whether summary judgment is appropriate in favor of or against any party as to the sole remaining FDCPA claim.

In sum, because Bradford's rescission claim is time-barred, all of Bradford's claims must be dismissed except his FDCPA claim that defendants attempted to foreclose on a note not in their possession, which remains to be considered on summary judgment.

An appropriate Order will issue.

The Clerk is directed to send a copy of this Memorandum Opinion to all counsel of record.