X-3.1 Other — Electronic Signatures in Global and National Commerce Act

X. Other — Electronic Signatures in Global and National Commerce Act

The Electronic Signatures in Global and National

Commerce Act (E-Sign Act)

Introduction

The Electronic Signatures in Global and National Commerce

Act (E-Sign Act),

signed into law on June 30, 2000, provides

a general rule of validity for electronic records and signatures

for transactions in or affecting interstate or foreign commerce.

The E-Sign Act allows the use of electronic records to satisfy

any statute, regulation, or rule of law requiring that such

information be provided in writing, if the consumer has

affirmatively consented to such use and has not withdrawn

such consent.

Subject to certain exceptions, the substantive provisions of the

law were effective on October 1, 2000. Record retention

requirements became effective on March 1, 2001. The E-Sign

Act grandfathers existing agreements between a consumer and

an institution to deliver information electronically. However,

agreements made on or after October 1, 2000, are subject to

the requirements of the E-Sign Act.

Summary of Major Provisions

Consumer Disclosures

Prior Consent, Notice of Availability of Paper Records

Prior to obtaining their consent, financial institutions must

provide the consumer, a clear and conspicuous statement

informing the consumer:

• of any right or option to have the record provided or made

available on paper or in a non electronic form, and the

right to withdraw consent, including any conditions,

consequences, and fees in the event of such withdrawal;

• whether the consent applies only to the particular

transaction that triggered the disclosure or to identified

categories of records that may be provided during the

course of the parties’ relationship;

• describing the procedures the consumer must use to

withdraw consent and to update information needed to

contact the consumer electronically; and

• informing the consumer how the consumer may

nonetheless request a paper copy of a record and whether

any fee will be charged for that copy.

See Section 101(c)(1)(B).

Public Law 106-229, June 30, 2000.

Hardware and Software Requirements; Notice of Changes

Prior to consenting to the use of an electronic record, a

consumer must be provided with a statement of the hardware

and software requirements for access to and retention of

electronic records. See Section 101(c)(1)(i).

Whether the consumer consents electronically, or confirms his

or her consent electronically, it must be in a manner that

reasonably demonstrates the consumer can access information

in the electronic form that will be used to provide the

information that is the subject of the consent. See Section

101(c)(1)(C)(ii).

If a change in the hardware or software requirements need to

access or retain electronic records creates a material risk that

the consumer will not be able to access or retain subsequent

electronic records subject to the consent, a financial institution

must:

• provide the consumer with a statement of (a) the revised

hardware and software requirements for access to and

retention of electronic records, and (b) the right to

withdraw consent without the imposition of any condition,

consequence, or fee for such withdrawal; and

• again comply with the requirements of subparagraph (c) of

this section.

See Section 101(c)(1)(D).

Oral communications or a recording of an oral communication

shall not qualify as an electronic record. See Section 101(c)(6).

Record Retention

The E-Sign Act requires a financial institution to maintain

electronic records accurately reflecting the information

contained in applicable contracts, notices or disclosures and

that they remain accessible to all persons who are legally

entitled to access for the period required by law in a form that

is capable of being accurately reproduced for later reference.

See Section 101(d).

Agreements reached with consumers prior to October 1, 2000,

to deliver information electronically are exempt from the

requirements of Section 101(d). However, for any agreements

made with new or existing customers on or after October 1,

2000, the requirements of Section 101(c)(1) will supersede all

other consumer consent procedures relating to the use of

electronic disclosures set forth in other regulations.

Regulatory and Other Actions

The consumer consent provisions in the E-Sign Act became

effective October 1, 2000, and did not require implementing

regulations. Nonetheless, on March 30, 2001, the Federal

Reserve Board (FRB) adopted interim final rules (Interim

Final Rules) and on November 9, 2007, the FRB adopted final

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X. Other — Electronic Signatures in Global and National Commerce Act

rules (Final Rules) establishing uniform standards for the

electronic delivery of federally mandated disclosures for five

consumer protection regulations: Regulation B, Equal Credit

Opportunity; Regulation E, Electronic Fund Transfers;

Regulation M, Consumer Leasing; Regulation Z, Truth in

Lending, and Regulation DD, Truth in Savings.

The Final Rules provided guidance on the timing and delivery of

electronic disclosures. Pursuant to the Final Rules, electronic

disclosures should be made using a method best suited to the

particular type of disclosure. If the consumer uses electronic

means to open an account or request a service, the disclosures

must be provided before the account is opened or the service is

requested. In response to a consumer request, disclosures should

be made available in a reasonable amount of time and may be

electronic if the consumer agrees. There are exceptions to the

consumer consent requirement for electronically providing certain

types of disclosures when the consumer is using electronic means

such as a home computer. Disclosures should be maintained on

the website for a reasonable amount of time for consumers to

access, view, and retain the disclosures. The mandatory

compliance date was October 1, 2008.

Definitions

“Consumer” – The term “consumer” means an individual who

obtains, through a transaction, products or services which are

used primarily for personal, family, or household purposes,

and also means the legal representative of such an individual.

“Electronic” – The term “electronic” means relating to

technology having electrical, digital, magnetic, wireless,

optical, electromagnetic, or similar capabilities.

“Electronic Agent” – The term “electronic agent” means a

computer program or an electronic or other automated means

used independently to initiate an action to respond to

electronic records or performances in whole or in part without

review or action by an individual at the time or the action or

response.

“Electronic Record” – The term “electronic record” means a

contract or other record created, generated, sent,

communicated, received, or stored by electronic means.

“Electronic Signature” – The term “electronic signature”

means an electronic sound, symbol, or process, attached to or

logically associated with a contract or other record and

executed or adopted by a person with the intent to sign the

record.

“Federal Regulatory Agency” – The term “Federal regulatory

agency” means an agency as that term is defined in section

552(f) of Title 5, United States code.

“Information” – The term “information” means data, text,

images, sounds, codes, computer programs, software,

databases, or the like.

“Person” – The term “person” means an individual,

corporation, business trust, estate, trust, partnership, limited

liability company, association, joint venture, governmental

agency, public corporation or any other legal or commercial

entity.

“Record” – The term “record” means information, that is

inscribed on a tangible medium or that is stored in an

electronic or other medium and is retrievable in perceivable

form.

“Requirement” – The term “requirement” includes a

prohibition.

“Self-Regulatory Organization” – The term “self-regulatory

organization” means an organization or entity that is not a

Federal regulatory agency or a State, but that is under the

supervision of a Federal regulatory agency and is authorized

under Federal law to adopt and administer rules applicable to

its members that are enforced by such organization or entity,

by a Federal regulatory agency, or by another self-regulatory

organization.

“State” – The term “State” includes the District of Columbia

and the territories and possessions of the United States.

“Transaction” – the term “transaction” means an action or set

of actions relating to the conduct of business, consumer, or

commercial affairs between two or more persons, including

any of the following types of conduct:

1. the sale, lease, exchange, licensing, or other disposition of

(i) personal property, including goods and intangibles, (ii)

services, and (iii) any combination thereof; and

2. the sale, lease, exchange, or other disposition of any

interest in real property, or any combination thereof.

Examination Procedures

1. Determine if and to what extent the financial institution

electronically delivers compliance-related notices or

disclosures subject to the consumer consent provisions of

the Act.

2. Determine if the financial institution has established

procedures to ensure compliance with the provisions of

this Act.

3. Determine that the consumer, prior to consenting, is

provided with a clear and conspicuous statement

informing the consumer of any right or option to have the

record provided or made available on paper or in non-

electronic form, and the right to withdraw the consent,

including any conditions, consequences, or fees in the

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X. Other — Electronic Signatures in Global and National Commerce Act

event of such withdrawal. Verify that the statement

contains the following:

a. informs the consumer whether the consent applies

only to the particular transaction that triggered the

disclosure or to identified categories of records that

may be provided during the course of the parties’

relationship;

b. describes the procedures the consumer must use to

withdraw consent and to update information needed to

contact the consumer electronically; and

c. informs the consumer how the consumer may

nonetheless request a paper copy of a record and

whether any fee will be charged for that copy.

4. Determine that the consumer, prior to consenting, is

provided with a statement of the hardware and software

requirements for access to and retention of electronic

records.

5. Determine that the consumer provides affirmative consent

electronically, or confirms his or her consent

electronically, in a manner that reasonably demonstrates

the consumer can access information in the electronic

form that will be used to provide the information that is

the subject of the consent.

NOTE: Oral communications shall not qualify as an electronic

record.

6. If a change in the hardware or software requirements

needed to access or retain electronic records creates a

material risk that the consumer will not be able to access

or retain subsequent electronic records subject to the

consent, verify that the financial institution provides the

consumer with the following:

a. statement of the revised hardware and software

requirements for access to and retention of electronic

records;

b. the right to withdraw consent without the imposition

of any condition, consequence, or fee for such

withdrawal; and

c. the consumer provides a new affirmative consent as

previously outlined.

7. Determine that the financial institution maintains a single

“authoritative” copy of any transferable record relating to

a loan secured by real property. Such record must be

“unique”, “identifiable”, and “unalterable”.

8. Determine that the financial institution maintains

electronic records accurately reflecting the information

contained in applicable contracts, notices, or disclosures

and that they remain accessible to all persons who are

legally entitled to access for the period required by law in

a form that is capable of being accurately reproduced for

later reference.

References

FIL 72-2000: Notice of Consumer Consent Requirements

Applicable to the Electronic Delivery of Consumer

Disclosures

FIL 30-2003: Federal Bank and Credit Union Regulatory

Agencies Jointly Issue Guidance on the Risk Associated with

Weblinking

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