The views expressed in this article do not necessarily reflect the views of Document Systems, Inc., and are those solely of the author.

Even the substitute Texas Plain Language Amendment sticks to the mistaken notion that there is an "average" borrower for whose easy understanding parties can write loan contracts.1 The plain truth is that the "average" borrower is a fiction and in Texas there is no "average" borrower but there are average borrowers; those who speak English and those who speak Spanish. Obviously, there are others. But, to the proposed law, they do not matter.

This troubling notion of the "average" borrower- at the heart of the proposed law - makes the Texas Amendment virtually impossible to implement. Indeed, if implemented, the undefined and fictional "average" borrower, including the "average" borrower who speaks only Spanish may be even more confused about his or her rights and obligations under the loan contract, loan summaries, and the required disclosures in a form that complies with the Federal Truth-In-Lending Act, 12 C.F.R. § 226.18; and, more than ever, undue influence could factor in his or her decision to enter into a loan contract, invalidating the loan contract altogether.

The Amendment is Not About Translation, Unfortunately

The proposed law is about a contract for a loan, a retail installment transaction, or a regulated home equity loan, (which) must be written in plain language2 designed to be easily understood by the average borrower and [which must be] printed in an easily readable fonts and type size. If the terms of the loan were negotiated in Spanish, a copy of a summary of loan terms and disclosure of "pertinent" information must be provided in Spanish and in "a form identical to disclosures required for a closed-end transaction under Regulation Z, 12 C.F.R. § 226.18."

It is unfortunate that the Amendment is not about requiring a Spanish translation of the summary of loan terms and disclosures of "other pertinent" information. If only if it were so, lenders and brokers could easily obtain an accurate, complete and certified Spanish translation of the relevant summary and disclosures. While it may not be impossible to write loan contracts in plain language, lenders and brokers will experience a nightmare as they struggle to provide, in Spanish - not in Spanish translation - "pertinent" information "in a form identical to disclosures required for a closed-end transaction under 12 C.F.R. § 226.18."3 Impliedly, the proposed law requires the use of only one version of language for loan contracts, summary, and disclosures; impliedly, because the Amendment conceives of two distinct versions within the same language, legalese and plain language. Interestingly enough, while the proposed law does not expressly bar parties from negotiating even in legalese, it mandates that the parties write loan contracts only in the plain language that the average consumer can easily understand.

Impossible to Implement

Because the "average" consumer is a fiction and no one can design a loan contract for easy understanding by a fiction, the Amendment is virtually impossible to implement. It will also prove extremely hard to write disclosures of pertinent information in Spanish in compliance with all of Regulation Z, 12 C.F.R. § 226.18's exhaustive technicalities, details, analyses, intricacies, and official staff interpretation.

Other challenges to successful implementation of the proposed law include limitations and the motivations of parties who speak only Spanish or other foreign language; the nature of language, the nature of the language of law and contracts, and the defect in plain language requirements and mandates; and, the impact of unfair or deceptive practices laws that prohibit the kind of writing a loan contract, summary, or disclosure that could result in a borrower who does not understand the loan contract or a borrower who is confused about his or her rights and obligations, and a borrower who is unduly influenced.

Borrower Motivations and Limitations

1. Borrowers who become psychologically committed to getting the loan want just money and not necessarily a loan contract, summary, or disclosures - regardless of the language, whether legalese, plain, or Spanish.
2. Borrowers, who experience anomie - powerlessness - and desperation at the same time - conclude even if the loan contract is unfair, what can they do? And, if they cannot do anything, why read? Why insist on plain language loan contract and summary of loan terms and disclosures in Spanish? Such borrowers, regardless of the terms of the loan, are grateful to the lender for simply making them the loan.
3. Borrowers who have developed general distrust of lenders and the lending process cannot objectively listen or read loan contracts even if such contracts are in plain language and requires summaries and disclosures in Spanish. Negative reports from organizations such as ACORN and the continuing litany of predatory lending are not helpful.

Lender and or Broker Motivations and Limitations

1. Lenders and brokers who may choose to comply with the requirements of the Amendment are helpless when borrowers cannot read loan contracts, summaries, and disclosures, even when provided in Spanish; when they can read but do not want to be overloaded with information at that point in time.
2. The compensation structure of the lender and the broker - commissions - does not encourage educating, informing, translating, and interpreting the subtleties and intricacies of the terms of the loan for the benefit of the vulnerable borrower who speaks only Spanish. The linguistically isolated, under the circumstances, are literally lost and they have no choice but to trust the lender and or the broker, or both, or some community or opinion leader.
3. Lenders and brokers, always under time pressure to quickly close loans even when the sun does not shine, view the responsibility to inform, educate, translate, and interpret for the borrower who speaks only Spanish as a drain on their resources. Consequently their approach to communicating with the borrower, under the circumstances is far from sincere and enthusiastic and, at best, minimalist.

The Nature of Language

1. Parties to a loan transaction, generally, speak and write language at different levels and no one can telescope all these levels into one level, the plain language level of the fictional "average" consumer.
2. Languages are audience-specific and the audience for plain language contracts, summaries, and disclosures is diverse with different agenda and motivation. Such audience includes the regulatory agencies that enforce compliance and conduct audits and the court who, in case of a dispute, dispense justice relying on the legal concept to determine the meaning of the plain language of the loan contract, disclosure, or summaries, or their decisions will be arbitrary. Plain language will work only when parties write the loan contract and the required summaries and disclosures for only each other.4

3. The language of contract is a separate foreign language because the language of law is in fact a privileged communication of the initiate5 and therefore not intended to be understood by those not in that particular profession; those who have not learnt to think conceptually cannot grasp many of the text that govern their legal obligations.6 Legalese is not under any list of foreign languages, but it should be. It takes as long to learn as any foreign language, and to most people legalese is a foreign language.

   Although, one can communicate the general function, importance, or effect of a legal concept in a particular loan transaction in plain language, such efforts, at best, can only be in a summary fashion, not word for word [including punctuations] and there is always a danger that an important term of obligation may be lost in the plain language or Spanish translation.

4. Under the proposed law, the "average" Spanish-speaking borrower would need a loan contract in plain language and the related disclosures and summaries in Spanish that he or she can understand. Such plain language is possible only if the original writing is also clear concept, well organized, and the one that an average consumer can understand.7 While one can certainly teach and learn plain writing, legislating such writing will provide no cure.8
5. A writer who cannot understand the legal structure of a regulated Texas loan cannot write the Texas loan contract in plain language "designed to be understood by the average borrower." Similarly, a Spanish writer, who cannot understand the legal structure of a regulated Texas loan, cannot write summary of loan terms and disclosures as required by the proposed law.
6. Unlike plain language, the language of law and the language of contract isolate relevant facts and subsume them under a rule of law. It is certainly a myth that Hemingway's writing style can be universally adapted for use in writing Texas plain language loan contracts, or Spanish language disclosures and summaries required by the proposed law.
7. To overcome borrower illiteracy, oral translation, in addition to written loan contracts, disclosures, and summaries, may also be required. Oral translation, especially when inconsistent with written contracts can be confusing, create misunderstanding, exert undue influence, and even degenerate into a dialogue on a particular borrower concern, question, or issue. All this could amount to an unauthorized practice of law.
8. Deception, confusion, or misunderstanding is inevitable when lenders and brokers negotiate a loan in one language and document the negotiations in another; or, using the same language, negotiate the terms of the loan in legalese and reduce their negotiations into writing in the plain language, or vice versa.9

Beyond Good Motives

The itch to accommodate, include, protect, and even pander to those who speak only Spanish is understandable in the context of that minority's growing purchasing power, credit needs, and political clout. Such efforts can also promote governmental policies towards such minorities, fulfill the promise of protection for such minorities,10 promote the rights of such minorities as borrowers, and respect the rights of such minorities to equal protection under the law. It is also good business to include in consumer lending in Texas, as elsewhere in the nation, those who speak only Spanish or another foreign language.

After the passage of the proposed law, what next may we expect? Out of Texas or from another state? After Texas accommodates, includes, protects and even panders to its Spanish-speaking linguistic minority whose turn will it be next and in what order? Could that, like in other countries, fan divisive impulses and flame communal passions? Could the passage of such legislation lead to a more ambitious legislation, whether in Texas or elsewhere, that could mandate entire loan contracts, including all the notices and disclosures to be written in any number of the world's languages in which parties negotiate the loan?11 The Amendment as originally introduced in the Texas legislature proposed exactly that creating a frightening vision of never ending compliance nightmare. And because we live in an age of some copy-and-paste legislation the itch to pander to linguistic minorities could develop into a nation-wide epidemic when all we really need is a translation: accurate and authentic.

Speaking "plainly," it is naïve, delusional, or demagogic to assume that the "average" borrower, whether in Texas or anywhere in the world, with no legal training and no education in conceptual thinking or doctrinal analysis, might understand a loan contract, summaries of loan terms, and required disclosures merely because his or her vocabulary includes all of the words in which the document is written.

Perhaps the best ways to accommodate, include, engage, and protect linguistic minorities, - whether Spanish or any other foreign language speaking - is not to require plain language written contracts in any language but to impose on the lender and the broker an absolute, unqualified, and affirmative duty to protect the borrower. It is tempting to impose similar duty on the linguistically challenged borrower and admonish him or her to learn the English language well enough to completely and fully understand his or her rights and obligations under a loan contract. However, a borrower, like any one, can take a lifetime learning a foreign language and loans must close quickly because time is, always, of the essence; including for the lender who needs his fees, the broker who needs his compensation, and the borrower who needs his money.

Dhiren Sharma is a Paralegal at Document Systems, Inc. and a member of its Legal/Compliance Department.