Loyola University Chicago School of Law, JD 2023
A new Nevada law will take effect October 1, 2021 aimed at ensuring that all consumers are protected from unfair and deceptive business acts and practices, regardless of their proficiency with the English language.
In January 2021, the Consumer Financial Protection Bureau (CFPB) issued guidance on how to best protect Limited English Proficiency (LEP) consumers. However, since the CFBP’s guidance is not mandatory, certain states have enacted their own laws to protect LEP consumers. These state laws vary, with some providing the recommended CFPB protection and some providing protection beyond that outlined in the CFPB guidance.
What is Nevada doing to protect its LEP consumers?
On June 2, 2021, Nevada Governor Steve Sisolak signed Assembly Bill 359 (Act) which requires businesses or their agents that advertise and negotiate transactions in a language other than English to provide a translation of the contract in the language that was used during the advertising and negotiations. The translation must be provided to the consumer who is a party to the contract or agreement and to any other signatories prior to the execution of the contract or agreement.
A knowing violation of these new requirements is deemed a deceptive trade practice under Nevada law. Non-compliance with the requirements of the act allows the aggrieved party to rescind the contract or agreement.
What types of contracts or agreements are covered by the new law?
Unless the context otherwise requires, the term “contract or agreement” means “the document that creates the rights and obligations of the parties which results from a negotiation or transaction,” of the type described in section 4(3) below.
The term also includes “any subsequent document that makes substantial changes to the rights and obligations of the parties.” The term does not include any “subsequent documents authorized or contemplated by the original document”, or any subsequent document that makes substantial changes. Documents authorized or contemplated by the original agreement include periodic statements, sales slips or invoices representing purchases made pursuant to a credit card agreement, memoranda of purchases made in an add-on sale, and refinancing documents.
Which types of transactions require translations?
Pursuant to section 4(3), the following transactions require translations:
- A loan or extension of credit that is secured by property, other than real property, that is used for personal, family, or household purpose
- A lease, sublease, rental contract, or other agreement or contract containing a term of tenancy for at least one month and that applies to a dwelling, apartment, mobile home, or other dwelling unit used as a residence
- An unsecured loan used for personal, family, or household purposes
Applicability to financial institutions
The translation requirement does not apply to banks, savings and loan associations, savings banks, thrift companies, or credit unions provided that (1) the entity has a physical location; and (2) the entity engages in a transaction other than the issuance of a credit card or an automobile loan.
Financial institutions that are required to provide disclosures pursuant to Regulation M or Regulation Z will be deemed to be in compliance with the translation requirement of section 4 if the required disclosure is translated into the same language that the contract or agreement was conducted in and if the translated disclosure is provided to the person who is a party to the contract and to any other person who may sign the contract or agreement prior to the execution of the contract or agreement.
Are there any items that do not require a translation?
The Act generally requires the contract or agreement be translated in its entirety, but provides exceptions for elements such as names and titles of persons, addresses, brand names, trade names, trademarks, registered service marks, full or abbreviated designations of the make and model of goods or services, alphanumeric codes, numerals, dollar amounts expressed in numerals, dates, or individual words or expressions that do not have a generally accepted non-English translation.
How should impacted parties prepare for compliance with the new law?
Impacted parties should review their business practices to ensure that any transactions conducted in a language other than English will be accompanied by translations conforming to the requirements of section 4 of the Act. If transactions are conducted using form agreements, it could be beneficial to draft a translation in commonly spoken languages other than English to have on hand to accompany those transactions.
For businesses with presences in multiple states, it would be wise to review current procedures for engaging in transactions with LEP consumers and consider implementing the Nevada translation requirement on a company-wide level. Specific concerns regarding implementation should be discussed with in-house or outside counsel to understand whether the exceptions apply to the business and what steps should be taken for compliance.
The Nevada law is modeled after a California law, which could provide guidance in forming compliant translation documents or clarify any potential questions regarding the impact of the law in practice.
Why are LEP laws important?
According to the 2019 Census Bureau data, twenty-two percent of the U.S. population over the age of five – roughly 67.8 million people – speaks a language other than English at home. Of these, approximately thirty-seven percent are LEP. LEP consumers face unique challenges in engaging with the financial sector within the U.S., as limited English proficiency makes it difficult to have the required amount of financial literacy to open bank accounts or understand other financial documents. As a result, many U.S. households are either unbanked or underbanked.
LEP laws seem to be having an impact in reducing the number of unbanked and underbanked households. A 2019 FDIC survey found that a record low 5.4 percent of U.S. households were unbanked, a sharp decline from a 2013 FDIC survey showing 7.7 percent of U.S. households as unbanked and twenty percent as underbanked.
With measures like the new Nevada LEP law more U.S. consumers may have the confidence to engage with the financial sector., as these laws provide important safeguards in ensuring that a lack of English proficiency does not result in the exploitation of unsuspecting consumers.