I
105TH CONGRESS
1ST SESSION
H. R. 2937
To provide for the recognition of digital and other forms of authentication
as an alternative to existing paper-based methods, to improve efficiency
and soundness of the Nation’s capital markets and the payment system,
and to define and harmonize the practices, customs, and uses applicable
to the conduct of electronic authentication, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
NOVEMBER 8, 1997
Mr. BAKER (for himself and Mr. DREIER) introduced the following bill; which
was referred to the Committee on Commerce, and in addition to the Com-
mittees on Government Reform and Oversight, the Judiciary, Science,
and Banking and Financial Services, for a period to be subsequently de-
termined by the Speaker, in each case for consideration of such provisions
as fall within the jurisdiction of the committee concerned
A BILL
To provide for the recognition of digital and other forms
of authentication as an alternative to existing paper-
based methods, to improve efficiency and soundness of
the Nation’s capital markets and the payment system,
and to define and harmonize the practices, customs, and
uses applicable to the conduct of electronic authentica-
tion, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Electronic Financial
Services Efficiency Act of 1997’’.
SEC. 2. FINDINGS AND PURPOSE.
(a) FINDINGS.—The Congress finds the following:
(1) In recent years, new technological applica-
tions have had a significant impact on bank capital
markets and the manner in which business enter-
prises and financial institutions conduct their activi-
ties and operations.
(2) Financial and consumer transactions and
communications are being conducted in digital elec-
tronic formats because of the adoption of new tech-
nological applications which allow for the instanta-
neous retrieval and transmission of information and
the electronic consummation of business and per-
sonal transactions.
(3) These changes relate not only to the cre-
ation, retention, and delivery of documentation and
other data, but also to the purchase and sale of
goods and services, the receipt and payment of
funds, and other aspects of commerce and finance.–
(4) These developments have allowed for the
emergence of a new electronic commerce infrastruc-
ture for consumer and financial communications and
transactions, and the concomitant emergence of elec-
tronic authentication methodologies.
(5) These new technologies have impacted, and
will continue to impact, the national payment sys-
tem, our financial services industry, and our Na-
tion’s capital markets.
(6) Parties to consumer and financial trans-
actions have heretofore entered into agreements,
consistent with paper-based authentication meth-
odologies.
(7) Thus, where the formation of agreements
are otherwise valid and effective under applicable
law, the parties should be able to use electronic au-
thentication methodologies of equal or greater reli-
ability.
(8) Given the size and importance of our do-
mestic economy and the fact that electronic com-
merce is not limited by geographical or national
boundaries and will have a significant impact on
international finance, the United States should be
actively involved in the development of uniform glob-
al standards for electronic authentication.
(9) There are many industries that have the
technical expertise, can meet proposed national
standards, and have the desire to offer electronic au-
thentication services. Therefore, it is important not
to prematurely limit market access and stifle growth
by narrowly defining industries that may provide
electronic authentication services.
(10) As a result, it is appropriate for Congress
to enable a framework whereby government, busi-
ness enterprises, financial institutions, and consum-
ers can participate in electronic commerce in a via-
ble, safe, efficient, and consistent manner.
(b) PURPOSE.—The purpose of this Act is to provide
for the recognition of digital and other forms of authen-
tication as an alternative to existing paper-based methods,
to improve efficiency and soundness of the Nation’s capital
markets and payment system, and to define and har-
monize the practices, customs, and uses applicable to the
conduct of electronic authentication.
SEC. 3. DEFINITIONS.
For purposes of this Act, the following definitions
shall apply:
(1) ELECTRONIC COMMERCE.—The term ‘‘elec-
tronic commerce’’ means the transaction or conduct
of business in whole or part by electronic means.
(2) ELECTRONIC MEANS.—The term ‘‘electronic
means’’ includes all forms of electronic communica-
tion mediated by computer, including telephonic
communications, facsimile, electronic mail, electronic
data exchanges, satellite, cable, and fiber optic com-
munications.
(3) ELECTRONIC AUTHENTICATION.—The term
‘‘electronic authentication’’ means any methodology,
technology, or technique intended to—
(A) establish the identity of the maker,
sender, or originator of a document or commu-
nication in electronic commerce; and
(B) establish the fact that the document or
communication has not been altered.
(4) DIGITAL
SIGNATURE.—The term ‘‘digital
signature’’ means any electronic symbol or series of
symbols, created, or processed by a computer, in-
tended by the party using it (or authorizing its use)
to have the same legal force and effect as a manual
signature.
(5) CERTIFICATION
AUTHORITY.—The term
‘‘certification authority’’ means any private or public
entity which provides assurance that a particular
digital signature, or other form of electronic authen-
tication, is tied to the identity of an individual or
legal entity, or attests to the current validity of such
a signature.
(6) TRUSTED THIRD PARTY.—The term ‘‘trust-
ed third party’’ means a certification authority who
is known to 2 transacting parties and whose certifi-
cate is relied upon by those parties.
(7) CERTIFICATE.—The term ‘‘certificate’’ is an
electronic message the contents of which enable the
recipient to determine the attestation made regard-
ing the certificate holder by the certification author-
ity.
(8) STATE.—The term ‘‘State’’ has the mean-
ing given to such term in section 3 of the Federal
Deposit Insurance Act.
(9) AFFILIATE.—The term ‘‘affiliate’’ means
any person that controls, is controlled by, or is
under common control with another person.
SEC. 
4. 
COMMUNICATIONS 
WITH 
FEDERAL 
GOVERN-
MENTAL AGENCIES.
In any written communication with an agency, de-
partment, or instrumentality of the United States Govern-
ment, or with any court of the United States, in which
a signature is required or used, any party to the commu-
nication may affix a signature by use of a digital signature
with a certificate issued by a trusted third party.
SEC. 5. VALIDITY OF ELECTRONIC AUTHENTICATION.
(a) VALIDITY
OF ELECTRONIC COMMUNICATIONS
WITH AGENCIES, COURTS, AND INSTRUMENTALITIES OF
THE UNITED STATES.—All forms of electronic authentica-
tion that comport with standards as described in sub-
sections (a) and (b) of section 6 of this Act shall have
standing equal to paper-based, written signatures, such
that, with respect to any communications with Federal ad-
ministrative agencies, Federal courts and other instrumen-
talities of the United States government—
(1) any rule of law which requires a record to
be in writing shall be deemed satisfied; and
(2) any rule of law which requires a signature
shall be deemed satisfied.
(b) VALIDITY OF ELECTRONIC COMMUNICATIONS IN
GENERAL.—Unless otherwise expressly prohibited by the
laws of any State, all forms of electronic authentication
that comport with the standards as described in sub-
sections (a) and (b) of section 6 shall have standing equal
to paper-based, written signatures, such that—
(1) any rule of law which requires a record to
be in writing shall be deemed satisfied; and
(2) any rule of law which requires a signature
shall be deemed satisfied.–
SEC. 6. CRITERIA FOR ELIGIBILITY.
(a) ELECTRONIC AUTHENTICATION.—Electronic au-
thentication technology shall be deemed valid hereunder
if such technology—
(1) reliably establishes the identity of the
maker, sender, or originator of a document or com-
munication in electronic commerce; and
(2) reliably establishes the fact that the docu-
ment or communication has not been altered.
(b) EMERGING TECHNOLOGIES.—2 currently ac-
knowledged signature technologies are public key cryptog-
raphy and signature dynamics technology. In contempla-
tion of acceptance of other technological applications, the
following criteria shall be applied in the determination of
their validity for purposes of this Act:
(1) The identification methodology shall be
unique to the person making, sending, originating a
document or communication.
(2) The identification technology shall be capa-
ble of verification.
(3) The identification method or device shall be
under the sole control of the person using it
(4) The identification technology or device shall
be linked to data or communication transmitted in
such a manner that if such data or communication
has been altered, the authentication becomes invalid.
SEC. 7. NATIONAL ASSOCIATION OF CERTIFICATION AU-
THORITIES.
(a) IN GENERAL.—There is hereby established the
National Association of Certification Authorities (here-
after in this section referred to as the ‘‘Association’’).
(b) REGISTRATION.—Any person or group wishing to
provide electronic authentication services in the United
States shall be a registered member of the Association.
(c) DENIAL OF MEMBERSHIP.—
(1) DECERTIFICATION.—The Association may
deny membership to any person or group (or any af-
filiate of such person or group) who has been decer-
tified pursuant to subsection (e)(5)(D)(iii).
(2) FAILURE TO COMPLY WITH CODE OF CON-
DUCT.—The Association may deny membership to
any provider of electronic authentication services
who fails to comply with any guidelines, standards,
or codes of conduct regarding the use of electronic
authentication established by the Electronic Authen-
tications Standards Review Committee pursuant to
subsection (e)(2).
(3) FAILURE TO MEET STANDARDS.—The Asso-
ciation may deny membership to any provider of
electronic authentication services to any person or
group that is unable to meet standards established
pursuant to subsections (a) and (b) of section 6.
regarding disciplinary actions taken by the Stand-
ards Review Committee in furtherance of the pur-
poses of this Act.
(3) ENFORCEMENT.—The Standards Review
Committee shall have enforcement powers to ensure
minimum standards and protections for consumers
and shall establish and adopt disciplinary procedures
and policies in furtherance of the purposes of this
Act.
(4) DISCIPLINARY
ACTIONS.—The Standards
Review Committee shall organize in a manner such
that disciplinary actions against members shall be
heard fairly and in a timely fashion and afford due
process.
(5) NOTIFICATION.—
(A) IN GENERAL.—If, in the opinion of the
Standards Review Committee, any certification
authority is engaging or has engaged in conduct
in contravention of any guideline, standard, or
code of conduct prescribed in accordance with
paragraph (3), the Standards Review Commit-
tee shall notify such certification authority.
(B) STATEMENT OF FACTS.—The notifica-
tion shall contain a statement of the facts con-
stituting the violation.
(C) PERIOD FOR RESPONSE.—The certifi-
cation authority shall respond to such notifica-
tion within 15 days.
(D) SANCTIONS.—Based upon the re-
sponse of the certification authority, if the
Standards Review Committee determines that
the certification authority has violated any such
guideline, standard, or code of conduct, the
committee may take any of the following ac-
tions:
(i) CENSURE.—Publicly censure the
certification authority.
(ii) SUSPENSION.—Prohibit the cer-
tification authority from providing elec-
tronic authentication services in the United
States for such period of time as the com-
mittee may determine to be appropriate.
(iii) DECERTIFICATION.—Prohibit the
certification authority from providing elec-
tronic authentication services in the United
States.
(iv) CIVIL PENALTY.—Impose mone-
tary penalties on the certification author-
ity.
(6) JUDICIAL REVIEW.—Any party aggrieved by
an order of the Standards Review Committee under
this Act may obtain a review of such order in the
United States Court of Appeals within any circuit
wherein such party has its principal place of busi-
ness or in the court of Appeals in the District of Co-
lumbia, by filing in the court, within 30 days after
the entry of the Standards Review Committee order,
a petition praying that the order of the Standards
Review Committee be set aside. A copy of such peti-
tion shall be forthwith transmitted to the Standards
Review Committee by the clerk of the court, and
thereupon the Standards Review Committee shall
file in the court the record made before the Stand-
ards Review Committee. Upon the filing of such pe-
tition the court shall have the jurisdiction to affirm,
set aside, or modify the order of the Standards Re-
view Committee and to require the Standards Re-
view Committee to take such action with regard to
the matter under review as the court deems proper.
The findings of the Standards Review Committee as
to the facts, if supported by substantial evidence,
shall be conclusive.–
(7) REPORT
TO
SECRETARY
OF
THE
TREAS-
URY.—The Standards Review Committee shall
transmit to the Secretary of the Treasury, not later
than February 20 and July 20 of each year, com-
plete reports of the activities of the committee un-
dertaken in furtherance of the purposes of this Act,
including a statement of the committee’s objectives
and plans for the next semiannual reporting period.
(8) STUDIES
AND
RECOMMENDATIONS.—The
Standards Review Committee may conduct studies
to carry out the purposes of this Act. On the basis
of such studies the Committee may make rec-
ommendations to the Secretary of the Treasury con-
cerning the implementation of this Act and such leg-
islative and administrative action as the committee
may determine to be necessary to promote the rec-
ognition of electronic authentication as an alter-
native to paper-based methods of verification.
SEC. 8. OVERSIGHT.
The Secretary of the Treasury shall provide effective
oversight and shall review the activities of the Electronic
Authentication Standards Review Committee on a semi-
annual basis, providing a venue for the discussion and air-
ing of all activity, standards and other material issues
which may have arisen during that time period.
SEC. 9. CONSUMER PROTECTION.
(a) IN GENERAL.—No provision of this Act shall be
construed as impairing any right afforded a consumer
under the provisions of any law applicable to an underly-
ing transaction or communication that is authenticated by
digital signature or other form of electronic authentication
that comports with the standards as described in sub-
sections (a) and (b) of section 6.
(b) NOTIFICATION.—Any transaction or communica-
tion involving a consumer that is authenticated by digital
signature or other form of electronic authentication that
comports with the standards as described in subsections
(a) and (b) of section 6 shall contain a notification of the
fact that such transaction or communication has been au-
thenticated. Such notification shall be in such form as pre-
scribed by the Electronic Authentication Standards Re-
view Committee.
(c) DEFINITIONS.—For purposes of this section, the
following definitions shall apply:
(1) CONSUMER.—The term ‘‘consumer’’ means
an individual.
(2) TRANSACTION.—The term ‘‘transaction’’ re-
fers only to transactions for personal, family, or
household purposes.
(3) COMMUNICATION.—The term ‘‘communica-
tion’’ means a communication pertaining only to
personal, family, or household purposes.
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