How to provide financial services to limited-English proficiency (“LEP”) consumers has become a pressing legal issue. Both federal and state laws provide requirements and limitations regarding translations of financial documents. Earlier this year, the Consumer Financial Protection Bureau (“CFPB”) published a comprehensive statement encouraging financial institutions to provide services to LEP consumers. The CFPB also took enforcement action against a company for, among other things, deceptively marketing to Spanish-speaking consumers. Following the trend to protect LEP consumers, a new Nevada law, effective October 1, 2021, makes it a deceptive practice to not provide translations for certain financial contracts, agreements and disclosures (“Nevada Law”).
Under the Nevada Law, enacted as Assembly Bill No. 359, any person, who in the course of business, advertises and negotiates certain transactions in a language other than English must provide a translation of the contract or agreement that results from the advertising and negotiations. The translation must include every term and condition of the contract or agreement.
Which transactions are covered?
Subsection 3 of Section 4 of the Nevada Law requires that translations be provided for a contract or an agreement with an LEP consumer that results from either of the following:
- A loan or extension of credit secured by property, other than real property, used for personal or household purposes
- A lease, sublease, rental contract or other contract or agreement for a term of at least one month and that involves a dwelling, apartment, mobile home or dwelling unit used as a residence
- An unsecured loan used for personal, family, or household purposes
Who is exempted from the translation requirements?
According to subsection 4 of Section 4, the translation requirements do not apply to banks or savings and loan associations that have physical locations and engage in a transaction other than the issuance of a credit card or automobile loan.
Under Section 5, a financial institution that is required to make disclosures under Regulation M (Consumer Leasing) or Regulation Z (Truth-in-Lending) will be deemed in compliance with the Nevada Law if it provides translations for those disclosures in the same language of the contract and provides the translated disclosure to the contracting parties before execution.
What is not required to be translated?
As detailed above, the law requires that every term and condition be translated. However, under Section 8 of the Nevada Law, the following text does not have to be translated:
- Names and titles of persons
- Addresses
- Brand names, trade names, trademarks, and registered service marks
- Make and model of goods or services
- Numerals, dollar amounts expressed in numerals and dates
- Individual words or expressions that do not have a generally accepted non-English translation
What are the consequences for not complying with the translation requirements?
Section 9 of the law provides the aggrieved party (e.g., LEP consumer) the right to rescind the contract or agreement if the financial institution fails to comply with the translation requirements.
Takeaways
As state attorneys general and legislatures take more measures to protect LEP consumers, financial institutions should revise their LEP policies and guidelines to ensure compliance with state and federal laws and regulations. The consequences for failure to comply with these regulations can be substantial as the new Nevada Law and recent CFPB enforcement activity show.
McGuireWoods has a team of attorneys who advise on laws and regulations impacting LEP consumers and how to implement best practices in servicing LEP consumers.