On June 30, 2000, the E-Sign Act was signed into law. The law’s effective date was October 1, 2000, with record retention requirements effective March 1, 2001. It provides a general rule of validity (Section 101) regarding electronic records and signatures for transactions in or affecting interstate or foreign commerce. It states:
- A signature, contract, or other record relating to such transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form; and
- A contract relating to such transaction may not be denied legal effect, validity, or enforceability solely because an electronic signature or electronic record was used in its formation.
In general, the E-Sign Act does not require any private party to agree to use or accept electronic records or electronic signatures. Nor does it mandate or recommend a specific technological standard for electronic signatures or records.
The E-Sign Act’s provisions include the use of electronic records to provide disclosures in electronic format rather than written form. In summary, this act allows the issuance of electronic records to satisfy any statute or regulation requiring such information be in writing, provided the consumer has previously agreed to accept the disclosures electronically.
Before consent for electronic disclosures is given, you must provide the consumer the following information:
- any right or option to receive a disclosure in paper form;
- whether the consent applies only to a particular transaction or to categories that may be provided during the course of the parties’ relationship;
- the right to withdraw consent to have records provided electronically, including any conditions, consequences, or fees associated with doing so. The credit union must describe the procedures for withdrawing consent and for updating information needed to contact the consumer electronically;
- how the consumer may obtain a paper copy of the record upon request; and
- the hardware and software requirements for access to and retention of the electronic information.
The consumer must consent electronically or confirm consent in a manner that “reasonably demonstrates that 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 an institution implements changes to hardware or software requirements that may prevent the consumer from obtaining access to or retaining electronic information, consumers must be notified of the new requirements and allowed to withdraw consent without charge.
Credit unions currently providing electronic disclosures or statements should note electronic delivery agreements reached prior to October 1, 2000, are exempt from the consumer consent for disclosures requirements, Section 101(c)(1), of the E-Sign Act. Agreements made with new or existing consumers on or after October 1, 2000, will be subject to the requirements of Section 101(c)(1).
The E-Sign Act also permits electronic retention of records required by other statutes and regulations, as long as the electronic form is accurate and capable of being reproduced for later reference.
Enclosed is a copy of the E-Sign Act. In addition to providing for electronic disclosures, the statute defines key terms including “electronic record” and “electronic signature” as well as specifying exceptions where the provisions of Section 101 do not apply.
Credit union officials should review the new statute carefully and ensure compliance of products delivered through electronic means.
National Credit Union Administration Board