On August 15, 2022, the California governor signed SB 633 into law, expanding the obligations of creditors obtaining the signatures of more than one person on a consumer credit contract, including a motor vehicle lease, who do not receive any of the money, property, or services that are subject to the consumer credit contract.
While a co-signer notice in English and Spanish was previously required, effective January 1, 2023, the amended statute requires all consumer credit contracts and motor vehicle leases to include a co-signer notice in four other languages prior to any person becoming obligated as a co-signer on such a contract or lease. The statute previously included English and Spanish model versions of the notice. The amended statute removed the Spanish model notice from the text and tasked the California Department of Financial Protection and Innovation with creating model co-signer notices in five languages in addition to English: Spanish, Chinese, Tagalog, Vietnamese, and Korean. The model notices can be found here (consumer credit contracts) and here (leases). Importantly, the statute includes no grace period and to date no guidance from the DFPI has provided for any such grace period.
The notice requirement also applies to a broad range of contracts and leases, given that “consumer credit contracts” are defined as any obligations to pay money on a deferred basis, if the money, property, services, or other consideration provided for in the contract is primarily for personal, family, or household purposes, including: (1) retail installment contracts and accounts under the Unruh Act; (2) conditional sales contracts, as defined under the Automobile Sales Finance Act; (3) loans or extensions of credit for use primarily for personal, family, or household purposes, whether unsecured or secured by collateral other than real property; (4) loans or extensions of credit for use primarily for personal, family, or household purposes, whether secured by real property or not, that are regulated under the Real Estate Law in the Business and Professions Code or the California Financing Law in the Financial Code; and (5) vehicle leases, as defined under the Motor Vehicle Leasing Act. (There is a limited exception for open-end credit, as defined in Regulation Z, with respect to joint applicants.)
In addition to the expansion of the notice requirement to a wide range of consumer contracts and leases, the amended statute now requires the co-signer notice to be provided in all six languages in which there are model notices, regardless of the language in which the contract was primarily negotiated. But if the contract or lease is written in a language other than English and such language is not one in which there is a model notice, the co-signer notice must be provided in English and in the language in which the contract or lease is written. Also, the amendment deleted the existing provision waiving the requirement for creditors and lessors to provide the notice to cosigners who are married to the primary signer.
Finally, the co-signer notice must be provided on a separate sheet to the consumer, dated and acknowledged by the consumer, and attached to and precede the consumer credit contract or lease. Failure to provide the required co-signer notice is now an affirmative defense to an action to enforce the contract or lease.
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