E-Sign Flashcards
How does E-Sign allow the use of electronic records?
It 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that such information be provided in writing, if the consumer has affirmatively consented to such use and has not withdrawn such consent.
Prior to obtaining a customer’s consent, a bank must provide the customer with a clear and conspicuous statement that contains what information? (4)
Informing the customer:
• 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.
What are the three main requirements under E-sign?
- The bank provide E-sign disclosures
- the bank provide a statement of hardware and software requirements
- Record retention requirements.
Prior to consenting to the use of an electronic record, a consumer must be provided what?
statement of the hardware
and software requirements for access to and retention of electronic records.
In what manner must a bank provide the customer the option to consent to receiving electronic records?
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.
If a bank changes the hardware or software requirements needed to access the electronic records they must do what?
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.
What are the record retention requirements under E-Sign?
A bank must maintain electronic records accurately reflecting the information contained in applicable contracts notices or disclosures and that they remain accessible for the period required by law or in a form that can be reproduced for reference.
Agreements before Oct 2000 are exempt from this requirement.
What other regulations have established uniform standards under E-Sign? (5)
- ECOA
- EFT
- Consumer Leasing (Reg M)
- TILA
- TISA
What are the timing and delivery requirements of electronic disclosures? (5)
- Should be made in a method best suited to the particular type of disclosure.
- If the customer 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.
What is a 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.
What is an 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.
What is a 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.
What is a transaction? (2)
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:
- the sale, lease, exchange, licensing, or other disposition of (i) personal property, including goods and intangibles, (ii) services, and (iii) any combination thereof; and
- the sale, lease, exchange, or other disposition of any interest in real property, or any combination thereof.
How can a consumer “reasonably demonstrate” their ability to receive electronic disclosures?
The E-Sign Act requires that consumers have the ability to receive/retrieve/access documents electronically. The best way for a financial institution to “reasonably demonstrate” this capacity is by providing the customer with a test document. If the consumer can open the test document, then the financial institution has met their burden of ensuring the consumer can receive/retrieve/access documents electronically.
It should be noted that Section 101(c)(1)(C)(ii) requires that financial institution personnel receive demonstrative consent that account holders can actually view .pdf formatted documents and not just that the consumers can access a web portal. In addition, providing links to download the required software does not demonstrate consumers can access the files. Overall, there are varieties of ways financial institutions can make demonstrating consent a seamless process for consumers.
Some financial institutions have made the “e-Sign Disclosure” and “access this sample PDF” hyperlinks to a PDF. By clicking the hyperlink and accessing the document, the consumer demonstrates their ability to open PDF documents. Other financial institutions have configured their online loan application processes to point to a PDF document, such as the application, for the consumer to demonstrate their consent.
Examiners have also reported that financial institutions use a method whereby the E-Sign Act disclosure contains the following language, for example, “By choosing ‘I consent,’ you acknowledge that you agree to the terms of the e-Sign Disclosure, you can access this sample PDF, and you consent to receive electronic communications and statements and other notices for your accounts, as described in the disclosure.” Following this disclosure is an “I consent” box, which when clicked, takes the consumer to a PDF document. If the consumer’s browser is not configured to accept PDF documents, the consumer will receive a message stating, “This page can’t be displayed.” If this occurs, the consumer has not “reasonably demonstrated” their ability to receive/retrieve/access electronic documents.
Would it be permissible for a bank to provide a computer or other electronic device at a branch, which the consumer could use to consent to electronic delivery?
Similarly, could a consumer who is interacting with a bank teller at a bank branch inform the bank teller that they consent to electronic delivery, either orally or through a written consent form?
In other words, would these means of obtaining consent, “reasonably demonstrate” that the consumer can access the information as required under Sec. 101(c)(1)(C)?
The E-SIGN Act requires the customer to consent electronically “in a manner that reasonably demonstrates that the consumer can access the information in the electronic form that will be used to provide the information that is the subject of the consent” (15 USC 7001(c)(1)(C)(ii)). For example, if the periodic statement would be sent via a .pdf file, the customer could open the test file or email and click on a .pdf file to demonstrate the ability to access the document.
By contrast, providing verbal consent or written consent limited to a statement such as “Yes, I can access this information electronically” would not be sufficient. See 15 USC 7001(c)(6).
However, we do not believe that the E-SIGN Act requires that the demonstration of ability to access the information electronically must take place on the consumer’s ‘home computer.’ Thus, we do not believe that a demonstration otherwise meeting the requirements of the E-SIGN Act would be insufficient simply because it takes place on a computer the bank has provided in its own branch office. We believe such a result would be unnecessarily restrictive, going beyond the spirit of the E-SIGN Act. Further, it would be impractical to enforce. Concluding that the demonstration of ability to receive information electronically cannot take place on a computer in a bank branch could logically imply that the consumer cannot consent using a computer at a library, community center, school dormitory computer lab, or other similar location. Numerous consumers do use computers in these locations as their means of accessing the Internet (in addition to the many consumers who access the Internet via mobile phones).
Rather, the focus of the E-SIGN requirement is on demonstrating that the consumer is able to access the information electronically – on whatever device the consumer uses to demonstrate that ability.
