BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 1160|
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THIRD READING
Bill No: AB 1160
Author: Fong (D)
Amended: 07/23/09 in Senate
Vote: 21
SENATE BANKING, FINANCE, AND INS. COMMITTEE : 7-3, 7/9/09
AYES: Calderon, Correa, Florez, Kehoe, Liu, Lowenthal,
Padilla
NOES: Cogdill, Cox, Runner
NO VOTE RECORDED: Harman, Price
SENATE JUDICIARY COMMITTEE : 3-2, 7/14/09
AYES: Corbett, Florez, Leno
NOES: Harman, Walters
SENATE APPROPRIATIONS COMMITTEE : 8-4, 8/17/09
AYES: Kehoe, Corbett, Hancock, Leno, Oropeza, Price, Wolk,
Yee
NOES: Cox, Denham, Runner, Walters
NO VOTE RECORDED: Wyland
ASSEMBLY FLOOR : 48-20, 6/18/09 - See last page for vote
SUBJECT : Contracts: translation
SOURCE : Center for Responsible Lending
DIGEST : This bill requires a financial organization that
negotiates a contract in one of five specified languages to
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provide the consumer with a summary of loan terms
translated into the language in which the contract was
originally negoitiated.
ANALYSIS :
Existing law:
1. Provides that any person engaged in a trade or business
who, either orally or in writing, negotiates certain
types of contracts or agreements primarily in Spanish,
Chinese, Tagalog, Vietnamese, or Korean, must deliver a
translation of that contract or agreement into the
language in which it was negotiated. The translated
contract or agreement must translate every term and
condition in the contract or agreement and must be
delivered to the non-English speaking party prior to the
contract's execution (Civil Code Section 1632).
2. Provides that the aforementioned translation requirement
applies to six different categories of contracts, as
follows:
A. A contract or agreement subject to the
provisions of state law governing retail
installment credit, automobile sales financing, or
vehicle leasing.
B. A loan or extension of credit that is either
unsecured or is secured by means other than real
property and that is used primarily for personal,
family, or household purposes.
C. A lease, sublease, rental contract or agreement,
or other term of tenancy contract or agreement that
is entered into for a period of longer than one
month and that covers a dwelling, apartment,
mobilehome, or other dwelling unit normally
occupied as a residence.
D. A loan or extension of credit for use primarily
for personal, family, or household purposes, where
the loan is subject to the provisions of the
Business and Professions Code relating to real
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estate brokers or the provisions of the Financial
Code relating to industrial loan companies and
finance lenders.
E. A reverse mortgage.
F. A contract or agreement for legal services
provided by a licensed attorney.
3. Provides that with respect to a mortgage loan negotiated
by a real estate broker, delivery of a translation of
the statement to the borrower that is required by
Section 10240 of the Business and Professions Code
satisfies the translation requirement.
4. Provides that the terms "contract" and "agreement" as
used in Civil Code Section 1632 mean the document
creating the rights and obligations of the parties and
include any subsequent document making substantial
changes to the rights and obligations of the parties.
Provides that the term contract or agreement does not
include any subsequent documents authorized or
contemplated by the original document, such as periodic
statements, sales slips or invoices representing
purchases made pursuant to a credit card agreement, or
other specified examples.
5. Provides that failure to comply with the translation
requirement is grounds for contract rescission by the
aggrieved party. If the contract or agreement for a
consumer credit sale or a consumer lease has been sold
or assigned to a financial institution, the consumer is
entitled to restitution from the person with whom he/she
originally entered into the contract. The consumer is
also entitled to give notice of rescission to the
financial institution that purchased the contract.
This bill:
1.Requires a supervised financial organization, as
defined, that negotiates primarily in Spanish, Chinese,
Tagalog, Vietnamese, or Korean (referred to in the
remainder of this analysis as the five specified
languages), whether orally or in writing, in the course
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of entering into a contract or agreement for a loan or
extension of credit secured by residential real
property, to deliver a specified form summarizing the
terms of that loan to the other party to that contract
or agreement, as specified.
2.Applies its provisions to supervised financial
organizations, which would include state-chartered
depository institutions, state-licensed finance lenders
and finance brokers, and state-licensed residential
mortgage lenders and servicers.
3.Exempts federally-chartered depository institutions from
its provisions.
4.Requires the Department of Corporations (DOC) and
Department of Financial Institutions (DFI) to create a
form to be made available in each of the five specified
languages, for use by supervised financial organizations
to summarize the terms of a mortgage loan, as specified,
and would authorize DOC and DFI to use the Good Faith
Estimate (GFE) developed by the United States Department
of Housing and Urban Development (HUD) as guidance when
developing the form.
5.Requires supervised financial organizations covered by
the bill to provide the required form to a borrower
within three business days after receiving a written
loan application from the borrower, and again, if any of
the loan terms summarized on the translated form
materially change after the translated form is provided,
but before the loan is consummated.
6.Provides that the translation requirement in the bill
does not apply to any person engaged in a trade or
business, who negotiates primarily in one of the five
specified languages, if the party with whom he or she is
negotiating (i.e., the non-English speaker) uses an
interpreter. For purposes of this exception, the
interpreter may not be a minor and must be able to speak
and read both English and the language he or she is
interpreting fluently. The interpreter may not be
employed by the person engaged in the trade or business.
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7.Provides that any translated form provided under the
bill may retain the following elements of the executed
English-language contract or agreement without
translation: names and titles of individuals and other
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, and individual
words or expressions having no generally accepted
non-English translation.
8.Provides that the terms of the English language version
of the contract or agreement determine the rights and
obligations of the parties. However, the translation of
the form is admissible as evidence in cases where it is
alleged that there is a substantial difference in the
material terms and conditions of the contract or
agreement and the translation.
9.Provides that a supervised financial organization that
complies with this bill is deemed to be in compliance
with Section 1632.
10.Provides that any supervised financial organization that
violates the bill's provisions is deemed to have
violated that organization's licensing law, and would
authorize a licensing agency to levy administrative
penalties, as specified, for violations of the bill.
The administrative penalties would be capped at $2,500
for a first violation; $5,000 for a second violation;
and $10,000 for each subsequent violation.
11.States that nothing in the bill shall be construed to
impair or impede the Attorney General from bringing an
action to enforce the bill.
12.Becomes operative on the later of July 1, 2010 or 90
days following the issuance of forms by both DOC and DFI
pursuant to the bill.
13.Adds a provision that states nothing in the bill is
intended to affect or impair any right or remedy
available under existing state law.
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14.Specifies that an action against a supervised financial
organization for a violation of the bill may only be
brought by a licensing agency or the Attorney General.
Background
Civil Code Section 1632 requires a person engaged in a
business or trade to deliver to the other party (purchaser,
lessee, borrower, etc.) a contract translated into the
language in which the transaction was primarily negotiated.
Section 1632 was first enacted by the Legislature in 1976
to increase consumer information and protections for the
state's sizeable and growing Spanish-speaking population.
Since then, the state's population has grown and become
more diverse, so that today, 12 million Californians speak
a language other than English in the home. The five
non-English languages most widely spoken by Californians
are Spanish, Chinese, Tagalog, Vietnamese, and Korean.
Under Section 1632, a mortgage broker who negotiates a loan
secured by residential property in one of the listed five
languages is required to provide a summary of the loan
terms to the borrower, translated into the language used in
the negotiations. The Department of Real Estate (DRE) has
developed three forms for use by brokers to satisfy this
requirement: Form 882 (used for non-federally related
mortgage transactions), Form 883 (used for federally
related mortgage transactions) and Form 885 (used for
mortgage transactions involving nontraditional or subprime
loans).
Existing law does not require banks, credit unions, or
residential mortgage lenders that negotiate mortgage loans
directly in one of the five specified languages to provide
translations of key terms of the contract or agreement to
borrowers. In 2007, AB 512 (Lieber) attempted to impose
the Section 1632 translation requirement on residential
mortgage loan lenders and brokers by amending the section
and requiring the Secretary of the Business, Transportation
and Housing Agency to develop a form summarizing loan
terms. That bill passed the Senate Judiciary Committee,
but eventually died in the Senate Banking, Finance and
Insurance Committee. According to the author's office,
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this bill represents a negotiated compromise reached after
over two years of contentious debate on the topic of
whether, and under what circumstances, residential mortgage
lenders who lend directly to a non-English speaking
borrower, without using a mortgage broker as an
intermediary, should provide a translated copy of a
mortgage loan disclosure statement to that borrower.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11
2011-12 Fund
Admin expenses $20 $0 $0 Special*
Enforcement
----unknown, likely less than $100----
Special*
*Financial Institutions
SUPPORT : (Verified 8/19/09)
Center for Responsible Lending (source)
California Communities United Institute
California Immigrant Policy Center
California Labor Federation, AFL-CIO
CALPIRG
Consumer Attorneys of California
Consumer Federation of California
Service Employees International Union
OPPOSITION : (Verified 8/19/09)
Law Foundation of Silicon Valley
ADF Networking Consultancy
Affordable Housing Services
California Capital Financial Development Corporation
California Coalition for Rural Housing
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California Reinvestment Coalition
California Resources and Training
Community Housing Development Corporation of North Richmond
Community Legal Services in East Palo Alto
Consumer Action
Contra Costa Interfaith Supporting Community Organizations
Council on Aging Silicon Valley
East L.A. Community Corporation
East Palo Alto Council of Tenant Education Fund
Fair Housing Council of San Diego
Fair Housing Council of the San Fernando Valley
Fair Housing Napa Valley
Fair Housing of Marin
Housing and Economic Rights Advocates
Housing Opportunities Collaborative
Housing Resource Center of Monterey County
Housing Rights Center
Housing Rights Committee of San Francisco
Inland Fair Housing and Mediation Board
National Consumer Law Center (on behalf of its low-income
clients)
National Fair Housing Alliance
Neighborhood Housing Services Silicon Valley
Sacramento Mutual Housing Association
SF EARN
TELACU/ Millennium; University of San Francisco School of
Law,
Predatory Lending Clinic
Vallejo Neighborhood Housing Services, Inc.
Women in Leadership
Yolo Mutual Housing Association
ARGUMENTS IN SUPPORT : According to the Center for
Responsible Lending, the sponsor of this bill, "A mortgage
is the largest and most complex financial transaction of
most people's lives. All borrowers deserve the opportunity
to understand their basic mortgage terms. AB 1160 simply
requires that lenders who negotiate a mortgage in another
language provide the borrower with a summary of the key
terms [of the mortgage] in that language. AB 1160 would
level the playing field."
ARGUMENTS IN OPPOSITION : According to the California
Reinvestment Coalition, an opponents of this bill, "Objects
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to the use of the GFE disclosure form as the "model" for
the summary form for compliance under proposed Civil Code
Section 1632.5 because that form has been "widely and
justifiably criticized as being of limited use to the
borrower in its current form." However, the GFE disclosure
form, opponents admit, has been updated since this
statement was made, and in its current form is much more
acceptable as a guideline for the new DOC-DFI form."
ASSEMBLY FLOOR :
AYES: Ammiano, Arambula, Beall, Bill Berryhill, Block,
Blumenfield, Brownley, Buchanan, Caballero, Carter,
Chesbro, Coto, Davis, De La Torre, De Leon, Eng, Evans,
Feuer, Fletcher, Fong, Fuentes, Furutani, Galgiani,
Gilmore, Hall, Hayashi, Hernandez, Hill, Huffman, Jones,
Krekorian, Ma, Mendoza, Monning, Nava, Nielsen, V. Manuel
Perez, Portantino, Ruskin, Salas, Saldana, Skinner,
Swanson, Torlakson, Torres, Torrico, Yamada, Bass
NOES: Adams, Anderson, Tom Berryhill, Blakeslee, Conway,
DeVore, Duvall, Fuller, Gaines, Garrick, Harkey,
Jeffries, Knight, Miller, Nestande, Niello, Silva, Smyth,
Audra Strickland, Villines
NO VOTE RECORDED: Charles Calderon, Cook, Emmerson,
Hagman, Huber, Lieu, Logue, Bonnie Lowenthal, John A.
Perez, Solorio, Tran, Vacancy
JJA:do 8/19/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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