You're correct, I didn't understand what he meant by significantly different until you pointed out because I have never encountered a system that didn't allow m

You're correct, I didn't understand what he meant by significantly different until you pointed out because I have never encountered a system that didn't allow me to have a "similar password". However, I have encountered ones where my new password could not contain previous passwords, so unless they are hashing each component of my password and comparing this probably does indicate clear-text storage.