ESIGN Issue Update

Senate Majority Whip John Thune has introduced legislation that would allow banks to serve customers at times of disruption, including addressing obstacles to serving customers during the COVID pandemic.

The Electronic Signatures in Global and National Commerce (E-SIGN Act) was signed into law in 2000 and gave electronic consent the same legal force as a wet-ink signature. At the last minute, a vague requirement was added into the final version. Called the "reasonable demonstration" requirement, it applies when a company obtains consent (in any form) from a consumer to electronically deliverdisclosures required by other laws or regulations (not E-SIGN itself).

The “reasonable demonstration” requirement in the E-SIGN Act states that a company can only rely upon the consent to receive disclosures electronically if the consumer subsequently demonstrates their ability to receive the electronic disclosure.

This additional post-consent step made sense at the time that E-SIGN passed, when fewer than half of American adults used the Internet, but not today. Additionally, this obsolete requirement is increasingly difficult to comply with on new platforms like mobile. Consumers are choosing to engage with financial institutions on these platforms, clearly indicating their ability and comfort in using them to communicate.

Digital Financial Services Are Essential During Emergencies Like COVID

When the unexpected happens, financial institutions need the flexibility to fulfill customer requests, such as accessing digital services or making loan accommodations. During the current pandemic, financial institutions small and large are trying to meet the needs of customers who cannot or do not want to visit a branch. Unfortunately, the E-SIGN Act is creating obstacles to providing the best solutions.

The E-SIGN Modernization Act would allow financial institutions to quickly honor requests from customers

• This bill would only eliminate the statutory requirement that consumers must demonstrate the ability to use email and basic web browsers.
• Does not affect when and how consumers give consent to receive electronic disclosures.
• Does not affect requirements about the delivery or form of disclosures (paper or otherwise) but merely streamlines the enrollment process for those consumers who do choose to receive electroniccorrespondence.

This reform would allow financial institutions to deploy innovative solutions for customers with nontraditional needs, such as those without frequent access to mail service, a computer, or a fixed location (i.e. active duty military serving abroad or housing-challenged persons).