Move beyond the electronic payment: how well do you know E-Sign?

Rozanne Andersen, Ontario Systems

As consumers continue to move away from paper and spend more time sending documents and payments electronically, ARM companies need to step up and keep compliant with the regulations that protect convenience. Electronic payments are covered at length – but what about signatures?

The Electronic Signatures in Global and National Commerce Act (E-Sign Act) provides parties with the ability to substitute electronic records for paper and sign electronic records using electronic signatures in place of wet signatures. It is also the law the US Congress passed to make clear digital documents and digital signatures have the same force and effect as paper and pen.

But E-Sign also contains an often-overlooked section that addresses when and how one may substitute the digital delivery of a legally required consumer disclosure in place of traditional delivery methods, such as hand delivery, certified mail, or the US postal service.

Creditors, governmental bodies, healthcare providers, and third-party debt collectors alike need to embrace the consumer disclosure requirements of E-Sign if they want to save on postage expenses and satisfy the growing needs of consumers to manage their business using electronic communication methods. To learn more about the Consumer Financial Protection Bureau (CFPB) position on E-Sign and how it impacts the third-party debt collectors, read the decision Lavallee v. Med 1.

In short, subparagraph c) of the E-Sign Act provides: if a statute, regulation, or other rule of law requires information relating to a transaction or transactions be provided or made available to a consumer in writing, the use of an electronic record may be substituted for its paper counterpart if the consumer is first provided with a clear and conspicuous notice informing him/her:

• consumer may receive the information in paper form at any time upon request;
• if consumer’s consent to receive electronic records applies to one or more transactions;
• consumer has the right to withdraw consent at any time;
• procedures the consumer may follow to withdraw consent and the consequences of withdrawing consent such as the imposition of fees or the termination of the relationship;
• process consumer may use to update their contact information;
• explanation of the hardware/software requirements for accessing and retaining records;
• process to obtain paper disclosures even after consent to receive electronic records has been given;
• consumer’s need to consent electronically, or electronically confirm consent, in a manner that reasonably demonstrates their ability to receive or access the information electronically.

I have seen paragraph c) E-Sign disclosures presented in as many as three pages filled with legalese or succinctly presented in a pop-up box on a debt collection website. But the length and complexity of the disclosure information is far less important than your need to simply address each point in your disclosure method and to provide this information to the consumer before they consent to receive their legal disclosures and documents electronically.

If you are contemplating the use of text messaging or email to provide consumers with legally required disclosures, such as the Fair Debt Collection Practices Act’s (FDCPA) validation notice or postdated payment notice or legally required documents, such as Reg E’s authorisation for preauthorised electronic funds transfers, advise your team to embrace E-Sign and use it to your advantage. It can save you the cost of many hundreds of thousands of first-class mail stamps.

By Rozanne Andersen, VP and chief compliance officer, Ontario Systems