On August 15, 2022, the California governor signed SB 633, which expands the obligation of creditors to provide a cosigner notice when obtaining more than one person’s signature on a consumer credit contract. For purposes of this law, a consumer credit contract includes, among other things, retail installment contracts, loans, or other extensions of credit.[1]
Under existing law, a creditor must provide the notice to each person who signs the consumer credit contract but who does not receive any of the money, property, or services, which are the subject matter of the contract (i.e., a cosigner), unless the persons are married to each other. In addition, under existing law, the required cosigner notice had to be provided in English and in Spanish. The notice could also be on a separate sheet from the contract or in the text of the contract itself.
SB 633 changes existing law by requiring the notice to be given to all cosigners on the contract, regardless of whether the persons are married to each other. The amended law also now requires that the notice must now be provided in any language, aside from English, set forth in Cal. Civ. Code § 1632(b) (i.e., Spanish, Chinese, Tagalog, Vietnamese, Korean). The notice must also comply with the following requirements:
- It may not contain any other text except as is necessary to identify the creditor and consumer credit contract or lessor and lease to which the statement refers;
- It must provide for the date and the person’s acknowledgment of receipt; and
- It must be attached to and precede the consumer credit contract. SB 633 also amends the text of the notice itself by changing how the header is presented and indicates it must be clear and conspicuous and in 10-point Arial equivalent type.
In addition, note that this law provides that if federal law or regulations require or permit the use of a substantially similar notice (e.g., the FTC Credit Practices Rule cosigner notice), the use of the federally sanctioned notice translated into the required languages will constitute compliance with the California notice.
The amended law becomes effective on January 1, 2023. On or before January 1, 2023, the Department of Financial Protection and Innovation (DFPI) will provide translations of the required notices on its website, which may be used to satisfy the notice requirement. As of now, the California DFPI has not yet released the translations for the notice, but we will continue to monitor the DFPI’s website for information as it becomes available.
[1] A “consumer credit contract” is defined to mean any of the following obligations to pay money on a deferred payment basis, where the money, property, services, or other consideration which is the subject matter of the contract is primarily for personal, family, or household purposes, including in relevant part: (a) Retail installment contracts; (b) Retail installment accounts; (3) Conditional sales contracts; (4) Loans or extensions of credit secured by other than real property, or unsecured, for use primarily for personal, family or household purposes; (5) Loans or extensions of credit for use primarily for personal, family or household purposes where such loans or extensions of credit are subject to the provisions of [certain enumerated sections], Division 7 (commencing with Section 18000), Division 9 (commencing with Section 22000) (California Financing Law), or Division 10 (commencing with Section 24000) of the Financial Code, whether secured by real property or otherwise; and (6) Lease contracts. Cal. Civ. Code § 1799.90(a). “Creditor” is defined to mean an individual, partnership, corporation, association or other entity, however designated, who enters into or arranges for consumer credit contracts in the ordinary course of business. Cal. Civ. Code § 1799.90(b)(definition not amended by SB 633).
