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To facilitate the use of electronic records and signatures in interstate or foreign commerce.
Electronic Signatures in Global and National Commerce Act. Contracts.
This Act may be cited as the ‘‘Electronic Signatures in Global and National Commerce Act’’.
denied legal effect, validity, or enforceability solely because an electronic signature or electronic record was used in its formation.
(2)require any person to agree to use or accept electronic records or electronic signatures, other than a governmental agency with respect to a record other than a contract to which it is a party.
(ii)again complies with subparagraph (C).
available to any consumer under any statute, regulation, or other rule of law.
was enacted prior to this Act expressly requires a record to be provided or made available by a specified method that requires verification or acknowledgment of receipt, the record may be provided or made available electronically only if the method used provides verification or acknowledg- ment of receipt (whichever is required).
OR CONFIRMATION OF CONSENT.—The legal effectiveness, validity, or enforceability of any contract executed by a con- sumer shall not be denied solely because of the failure to obtain electronic consent or confirmation of consent by that consumer in accordance with paragraph (1)(C)(ii).
(4) PROSPECTIVE EFFECT.—Withdrawal of consent by a con- sumer shall not affect the legal effectiveness, validity, or enforceability of electronic records provided or made available to that consumer in accordance with paragraph (1) prior to implementation of the consumer’s withdrawal of consent. A consumer’s withdrawal of consent shall be effective within a reasonable period of time after receipt of the withdrawal by the provider of the record. Failure to comply with paragraph (1)(D) may, at the election of the consumer, be treated as a withdrawal of consent for purposes of this paragraph.
(5)PRIOR CONSENT.—This subsection does not apply to any records that are provided or made available to a consumer who has consented prior to the effective date of this title to receive such records in electronic form as permitted by any statute, regulation, or other rule of law.
(6)ORAL COMMUNICATIONS.—An oral communication or a recording of an oral communication shall not qualify as an electronic record for purposes of this subsection except as other- wise provided under applicable law.
(B)remains accessible to all persons who are entitled to access by statute, regulation, or rule of law, for the period required by such statute, regulation, or rule of law, in a form that is capable of being accurately reproduced for later reference, whether by transmission, printing, or otherwise.
(2)EXCEPTION.—A requirement to retain a contract or other record in accordance with paragraph (1) does not apply to any information whose sole purpose is to enable the contract or other record to be sent, communicated, or received.
available, or retained in its original form, or provides con- sequences if the contract or other record is not provided, avail- able, or retained in its original form, that statute, regulation, or rule of law is satisfied by an electronic record that complies with paragraph (1).
RECORDS.—Notwithstanding subsection (a), if a statute, regulation, or other rule of law requires that a contract or other record relating to a transaction in or affecting interstate or foreign commerce be in writing, the legal effect, validity, or enforceability of an electronic record of such contract or other record may be denied if such electronic record is not in a form that is capable of being retained and accurately reproduced for later reference by all parties or persons who are entitled to retain the contract or other record.
(f) PROXIMITY.—Nothing in this title affects the proximity required by any statute, regulation, or other rule of law with respect to any warning, notice, disclosure, or other record required to be posted, displayed, or publicly affixed.
tion, or other rule of law requires a signature or record relating to a transaction in or affecting interstate or foreign commerce to be notarized, acknowledged, verified, or made under oath, that requirement is satisfied if the electronic signature of the person authorized to perform those acts, together with all other information required to be included by other applicable statute, regulation, or rule of law, is attached to or logically associated with the signa- ture or record.
(h)ELECTRONIC AGENTS.—A contract or other record relating to a transaction in or affecting interstate or foreign commerce may not be denied legal effect, validity, or enforceability solely because its formation, creation, or delivery involved the action of one or more electronic agents so long as the action of any such electronic agent is legally attributable to the person to be bound.
(i)INSURANCE.—It is the specific intent of the Congress that Applicability. this title and title II apply to the business of insurance.
SEC. 102. EXEMPTION TO PREEMPTION. 15 USC 7002.
(B)if enacted or adopted after the date of the enactment of this Act, makes specific reference to this Act.
PANTS.—Subsection (a)(2)(A)(ii) shall not apply to the statutes, regu- lations, or other rules of law governing procurement by any State, or any agency or instrumentality thereof.
(c)PREVENTION OF CIRCUMVENTION.—Subsection (a) does not permit a State to circumvent this title or title II through the imposition of nonelectronic delivery methods under section 8(b)(2) of the Uniform Electronic Transactions Act.
15USC 7003. SEC. 103. SPECIFIC EXCEPTIONS.
(3)the Uniform Commercial Code, as in effect in any State, other than sections 1–107 and 1–206 and Articles 2 and 2A.
(3)any document required to accompany any transportation or handling of hazardous materials, pesticides, or other toxic or dangerous materials.
tion of consumers. Within 3 years after the date of enactment of this Act, the Assistant Secretary shall submit a report to the Congress on the results of such evaluation.
(2) DETERMINATIONS.—If a Federal regulatory agency, with respect to matter within its jurisdiction, determines after notice and an opportunity for public comment, and publishes a finding, that one or more such exceptions are no longer necessary for the protection of consumers and eliminating such exceptions will not increase the material risk of harm to consumers, such agency may extend the application of section 101 to the excep- tions identified in such finding.
SEC. 104. APPLICABILITY TO FEDERAL AND STATE GOVERNMENTS.
(a) FILING AND ACCESS REQUIREMENTS.—Subject to subsection (c)(2), nothing in this title limits or supersedes any requirement by a Federal regulatory agency, self-regulatory organization, or State regulatory agency that records be filed with such agency or organization in accordance with specified standards or formats.
(B)to the extent such agency is authorized by statute to issue orders or guidance, the issuance of orders or guid- ance of general applicability that are publicly available and published (in the Federal Register in the case of an order or guidance issued by a Federal regulatory agency).
(iii)the methods selected to carry out that purpose do not require, or accord greater legal status or effect to, the implementation or application of a specific tech- nology or technical specification for performing the functions of creating, storing, generating, receiving, communicating, or authenticating electronic records or electronic signatures.
Notwithstanding paragraph (2)(C)(iii), a Federal regulatory agency or State regulatory agency may interpret section 101(d) to specify performance standards to assure accuracy, record integrity, and accessibility of records that are required to be retained. Such performance standards may be specified in a manner that imposes a requirement in violation of paragraph (2)(C)(iii) if the requirement (i) serves an important governmental objective; and (ii) is substantially related to the achievement of that objective. Nothing in this paragraph shall be construed to grant any Federal regulatory agency or State regulatory agency authority to require use of a particular type of software or hardware in order to comply with section 101(d).
(ii)imposing such requirement is essential to attaining such interest.
PARTICIPANT.—Paragraph (2)(C)(iii) shall not apply to the stat- utes, regulations, or other rules of law governing procurement by the Federal or any State government, or any agency or instrumentality thereof.
(b)(other than paragraph (3)(B) thereof) shall be construed to grant any Federal regulatory agency or State regulatory agency authority to impose or reimpose any requirement that a record be in a tangible printed or paper form.
WORK ELIMINATION ACT.—Nothing in subsection (a) or (b) relieves any Federal regulatory agency of its obligations under the Government Paperwork Elimination Act (title XVII of Public Law 105–277).
from the requirements relating to consent in section 101(c) if such exemption is necessary to eliminate a substantial burden on electronic commerce and will not increase the material risk of harm to consumers.
(2) PROSPECTUSES.—Within 30 days after the date of enact- ment of this Act, the Securities and Exchange Commission shall issue a regulation or order pursuant to paragraph (1) exempting from section 101(c) any records that are required to be provided in order to allow advertising, sales literature, or other information concerning a security issued by an invest- ment company that is registered under the Investment Com- pany Act of 1940, or concerning the issuer thereof, to be excluded from the definition of a prospectus under section 2(a)(10)(A) of the Securities Act of 1933.
(e) ELECTRONIC LETTERS OF AGENCY.—The Federal Commu- nications Commission shall not hold any contract for telecommuni- cations service or letter of agency for a preferred carrier change, that otherwise complies with the Commission’s rules, to be legally ineffective, invalid, or unenforceable solely because an electronic record or electronic signature was used in its formation or authoriza- tion.
(a)DELIVERY.—Within 12 months after the date of the enact- ment of this Act, the Secretary of Commerce shall conduct an inquiry regarding the effectiveness of the delivery of electronic records to consumers using electronic mail as compared with delivery of written records via the United States Postal Service and private express mail services. The Secretary shall submit a report to the Congress regarding the results of such inquiry by the conclusion of such 12-month period.
required by section 101(c)(1)(C)(ii) would increase the incidence of fraud directed against consumers; and suggesting any revisions to the provision deemed appropriate by the Secretary and the Commission. In conducting this evaluation, the Secretary and the Commission shall solicit comment from the general public, consumer representatives, and electronic commerce businesses.
15 USC 7006. SEC. 106. DEFINITIONS.
(1)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.
(2)ELECTRONIC.—The term ‘‘electronic’’ means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.
(3)ELECTRONIC AGENT.—The term ‘‘electronic agent’’ means a computer program or an electronic or other automated means used independently to initiate an action or respond to electronic records or performances in whole or in part without review or action by an individual at the time of the action or response.
(4)ELECTRONIC RECORD.—The term ‘‘electronic record’’ means a contract or other record created, generated, sent, communicated, received, or stored by electronic means.
(5)ELECTRONIC SIGNATURE.—The term ‘‘electronic signa- ture’’ means an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.
regulatory agency’’ means an agency, as that term is defined in section 552(f) of title 5, United States Code.
(7)INFORMATION.—The term ‘‘information’’ means data, text, images, sounds, codes, computer programs, software, data- bases, or the like.
(8)PERSON.—The term ‘‘person’’ means an individual, cor- poration, business trust, estate, trust, partnership, limited liability company, association, joint venture, governmental agency, public corporation, or any other legal or commercial entity.
(9)RECORD.—The term ‘‘record’’ means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
(10)REQUIREMENT.—The term ‘‘requirement’’ includes a prohibition.
regulatory organization’’ means an organization or entity that is not a Federal regulatory agency or a State, but that is under the supervision of a Federal regulatory agency and is authorized under Federal law to adopt and administer rules applicable to its members that are enforced by such organiza- tion or entity, by a Federal regulatory agency, or by another self-regulatory organization.
(12)STATE.—The term ‘‘State’’ includes the District of Columbia and the territories and possessions of the United States.
(a)IN GENERAL.—Except as provided in subsection (b), this title shall be effective on October 1, 2000.
(ii)a State statute, regulation, or other rule of law administered or promulgated by a State regulatory agency.
on March 1, 2001, a Federal regulatory agency or State regulatory agency has announced, proposed, or initiated, but not completed, a rulemaking proceeding to prescribe a regulation under section 104(b)(3) with respect to a requirement described in subparagraph (A), this title shall be effective on June 1, 2001, with respect to such require- ment.
502of the Federal Credit Reform Act of 1990), or involving a program listed in the Federal Credit Supplement, Budget of the United States, FY 2001, this title applies only to such transactions entered into, and to any loan or mortgage made, insured, or guaranteed by the United States Government there- under, on and after one year after the date of enactment of this Act.
(B)one year after the date of enactment of this Act.
SEC. 201. TRANSFERABLE RECORDS. 15 USC 7021.
(C)relates to a loan secured by real property.
(2)OTHER DEFINITIONS.—The terms ‘‘electronic record’’, ‘‘electronic signature’’, and ‘‘person’’ have the same meanings provided in section 106 of this Act.
(b)CONTROL.—A person has control of a transferable record if a system employed for evidencing the transfer of interests in the transferable record reliably establishes that person as the per- son to which the transferable record was issued or transferred.
(6)any revision of the authoritative copy is readily identifi- able as authorized or unauthorized.
(d)STATUS AS HOLDER.—Except as otherwise agreed, a person having control of a transferable record is the holder, as defined in section 1–201(20) of the Uniform Commercial Code, of the transferable record and has the same rights and defenses as a holder of an equivalent record or writing under the Uniform Commercial Code, including, if the applicable statutory require- ments under section 3–302(a), 9–308, or revised section 9–330 of the Uniform Commercial Code are satisfied, the rights and defenses of a holder in due course or a purchaser, respectively. Delivery, possession, and endorsement are not required to obtain or exercise any of the rights under this subsection.
(e)OBLIGOR RIGHTS.—Except as otherwise agreed, an obligor under a transferable record has the same rights and defenses as an equivalent obligor under equivalent records or writings under the Uniform Commercial Code.
(f)PROOF OF CONTROL.—If requested by a person against which enforcement is sought, the person seeking to enforce the transfer- able record shall provide reasonable proof that the person is in control of the transferable record. Proof may include access to the authoritative copy of the transferable record and related busi- ness records sufficient to review the terms of the transferable record and to establish the identity of the person having control of the transferable record.
(g) UCC REFERENCES.—For purposes of this subsection, all references to the Uniform Commercial Code are to the Uniform Commercial Code as in effect in the jurisdiction the law of which governs the transferable record.
This title shall be effective 90 days after the date of enactment of this Act.
SEC. 301. PRINCIPLES GOVERNING THE USE OF ELECTRONIC SIGNA- 15 USC 7031.
(1) REQUIRED ACTIONS.—The Secretary of Commerce shall promote the acceptance and use, on an international basis, of electronic signatures in accordance with the principles speci- fied in paragraph (2) and in a manner consistent with section 101 of this Act. The Secretary of Commerce shall take all actions necessary in a manner consistent with such principles to eliminate or reduce, to the maximum extent possible, the impediments to commerce in electronic signatures, for the pur- pose of facilitating the development of interstate and foreign commerce.
(A)Remove paper-based obstacles to electronic trans- actions by adopting relevant principles from the Model Law on Electronic Commerce adopted in 1996 by the United Nations Commission on International Trade Law.
(B)Permit parties to a transaction to determine the appropriate authentication technologies and implementa- tion models for their transactions, with assurance that those technologies and implementation models will be rec- ognized and enforced.
(C)Permit parties to a transaction to have the oppor- tunity to prove in court or other proceedings that their authentication approaches and their transactions are valid.
(D)Take a nondiscriminatory approach to electronic signatures and authentication methods from other jurisdic- tions.
(b)CONSULTATION.—In conducting the activities required by this section, the Secretary shall consult with users and providers of electronic signature products and services and other interested persons.
(c)DEFINITIONS.—As used in this section, the terms ‘‘electronic record’’ and ‘‘electronic signature’’ have the same meanings provided in section 106 of this Act.
‘‘(h) GIFTS, BEQUESTS, AND DEVISES.—The Commission may accept, use, and dispose of gifts, bequests, or devises of services or property, both real (including the use of office space) and per- sonal, for the purpose of aiding or facilitating the work of the Commission. Gifts or grants not used at the termination of the Commission shall be returned to the donor or grantee.’’.
HOUSE REPORTS: No. 106–341, accompanying H.R. 1714, Pt. 1 (Comm. on Com- merce) and Pt. 2 (Comm. on the Judiciary).
SENATE REPORTS: Nos. 106–131 (Comm. on Commerce, Science, and Transpor- tation) and 106–661 (Comm. of Conference).
Vol. 145 (1999): Nov. 19, considered and passed Senate.
Vol. 146 (2000): Feb. 16, considered and passed House, amended, in lieu of H.R. 1714.
June 14, House agreed to conference report.
June 15, 16, Senate considered and agreed to conference report.
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 36 (2000): June 30, Presidential remarks and statement.
On June 30, 2000, Congress enacted the Electronic Signatures in Global and National Commerce Act(1) ("ESIGN" or "the Act"), to facilitate the use of electronic records and signatures in interstate and foreign commerce by ensuring the validity and legal effect of contracts entered into electronically. Careful to preserve the underlying consumer protection laws governing consumers' rights to receive certain information in writing, Congress imposed special requirements on businesses that want to use electronic records or signatures in consumer transactions. Section 101(c)(1)(C)(ii) of the Act requires businesses to obtain from consumers electronic consent or confirmation to receive information electronically that a law requires to be in writing. The Act went into effect in October 2000.
In Section 105(b) of the Act, Congress directed the Department of Commerce (Commerce) and the Federal Trade Commission (FTC) to issue a report on the impact of the consumer consent provision of Section 101(c)(1)(C)(ii). Specifically, Congress asked Commerce and the FTC to report on the benefits of that consumer consent provision to consumers; the burdens that the provision imposes on electronic commerce ("e-commerce"); whether the benefits outweigh the burdens; the effect of the consent provision in preventing fraud; and whether any statutory changes are necessary.
To evaluate these issues, Commerce and the FTC conducted extensive outreach to the on-line business community, technology developers, consumer groups, law enforcement and academia. To solicit public comments from these groups and the general public, the agencies issued a Notice in the Federal Register. The agencies also conducted a Public Workshop to explore issues raised in the comments and outreach efforts. The record consists of written comments and public workshop discussion, as well as anecdotal evidence, expert opinion, and independent research. There was consensus among the participants and commenters that not enough time has passed since the law took effect to: a) allow consumers or businesses to experience the full effect of the provision; b) develop sufficient empirical data to evaluate quantitatively whether the benefits of implementation outweigh the burdens; and c) determine whether the lack of the type of procedure required by the consumer consent provision would lead to an increase in deception and fraud against consumers.
Although participants expressed a range of views, it is reasonable to conclude that, thus far, the benefits of the consumer consent provision of ESIGN outweigh the burdens of its implementation on electronic commerce. The provision facilitates e-commerce and the use of electronic records and signatures while enhancing consumer confidence. It preserves the right of consumers to receive written information required by state and federal law. The provision also discourages deception and fraud by those who might fail to provide consumers with information the law requires that they receive.
The consumer consent provision in ESIGN appears to be working satisfactorily at this stage of the Act's implementation. Almost all participants in the study recommended that, for the foreseeable future, implementation issues should be worked out in the marketplace and through state and federal regulations. Therefore, Commerce and the FTC recommend that Congress take no action at this time to amend the statute.
The benefits of e-commerce extend beyond the dollar values that are placed on business activity: it gives consumers access to an unlimited marketplace of goods and services ranging from music and stocks to on-line books and shopping services at their fingertips. To continue enjoying the fruits of this technology, businesses and consumers - domestic and international - must have confidence in the integrity and credibility of this emerging electronic marketplace. Congress intended ESIGN to have a positive impact on the continued growth of e-commerce and consumer confidence.
Moreover, Section 101(c)(1)(C)(ii) states that a consumer's consent to receive electronic records is valid only if the consumer "consents electronically or confirms his or her consent electronically, 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."(6) Section 101(c)(1)(C)(ii) overlays existing state and federal laws requiring that certain information be provided to consumers in writing. It also provides a framework for how businesses can comply with the underlying statutory or regulatory requirement to provide written information to consumers electronically - whether the information is a disclosure, a notice, or a statement of rights and obligations - within the context of a business-to-consumer transaction.
Within 12 months after the date of the enactment of this Act, the Secretary of Commerce and the Federal Trade Commission shall submit a report to Congress evaluating any benefits provided to consumers by the procedure required by section 101(c)(1)(C)(ii); any burdens imposed on electronic commerce by that provision; whether the benefits outweigh the burdens; whether the absence of the procedure required by section 101(c)(1)(C)(ii) would increase the incidence of fraud directed against consumers; and suggesting any revisions to the provision deemed appropriate by the Secretary and the Commission. In conducting this evaluation, the Secretary and the Commission shall solicit comment from the general public, consumer representatives, and electronic commerce businesses.
The National Telecommunications and Information Administration (NTIA), on behalf of the Department of Commerce, and the FTC conducted the study required by Section 105(b). Based on the narrow mandate in Section 105(b), the agencies have focused their study and this Report on Section 101(c)(1)(C)(ii), and did not evaluate any other consumer protection provisions of the Act.
To evaluate the technology available to employ the consumer consent provision, and to learn how companies are implementing Section 101(c)(1)(C)(ii), the agencies conducted extensive outreach to the on-line business community, technology developers, consumer groups, law enforcement, and academia. The industry contacts included high-tech companies involved in infrastructure development for electronic contracting and electronic payment systems, as well as business entities that use, or plan to use, electronic records in consumer transactions. All interested parties were encouraged to submit papers and comments on the benefits and burdens of the requirement, and staff did research to identify the types of businesses that are using the Section 101(c)(1)(C)(ii) consumer consent procedures for providing information "in writing" to consumers in electronic formats.
In response to the Notice, NTIA and the FTC received 32 comments from consumer organizations, software and computer companies, banks, members of the financial services industry and academics.(9) Many of the commenters responded electronically to a special e-mail box. In addition, four commenters submitted supplemental statements after the workshop. NTIA and the FTC posted all written comments on their websites to facilitate public access.
The following sections of this Report provide an analysis of the comments and information received in response to the Federal Register Notice and outreach activities, during the workshop discussion and after the workshop. Specifically, Section III provides an overview of the issues raised by the comments and the workshop discussion. Section IV analyzes the benefits and burdens of the consumer consent provision in Section 101(c)(1)(C)(ii), and evaluates the effect of the consumer consent provision in preventing fraud. Section V states the agencies' conclusions.
In general, consumer advocates and state law enforcement agencies expressed strong support for the consumer consent provision in Section 101(c)(1)(C)(ii) as an effective tool to prevent fraud and increase consumer confidence in the electronic marketplace. In their responses to the Federal Register Notice and their comments at the workshop, consumer groups and state law enforcement agencies said the benefits of Section 101(c)(1)(C)(ii) to consumers and e-commerce businesses outweigh the burdens associated with adapting business systems to comply with the provision.
The consumer advocates who submitted comments and those who participated in the workshop identified a number of benefits that the consumer consent provision in Section 101(c)(1)(C)(ii) provides.
Section 105(b) asks whether Section 101(c)(1)(C)(ii) imposes burdens on e-commerce. While the participants in our study identified some burdens on e-commerce, they also identified several benefits. The commenters identified the following benefits and burdens for e-commerce businesses.
Some commenters noted that the consumer consent provision in Section 101(c)(1)(C)(ii) provides legal certainty in on-line business transactions, and may act as a "safe-harbor" for e-commerce businesses that follow the parameters in the Act.(30) Businesses that implement procedures for complying with Section 101(c)(1)(C)(ii) have some assurance that they have obtained consent and provided electronic documents in a manner sufficient to make the electronic transactions legally valid.(31) In addition, they obtain information to show that the record they provided could be accessed by the consumer.(32) As a result, the consumer consent provision may protect e-commerce businesses from baseless legal claims by providing an electronic or paper document trail of the transaction when disclosures or other records are provided electronically to consumers.
Although a number of e-commerce businesses, principally in the financial services industry, have implemented the procedures in Section 101(c)(1)(C)(ii), there was consensus among the participants and commenters that not enough time has passed since the law took effect to: a) allow consumers or businesses to experience the full effect of the provision; b) develop sufficient empirical data to evaluate quantitatively whether the benefits of implementation outweigh the burdens; and c) determine whether the lack of the type of procedure required by the consumer consent provision would lead to an increase in deception and fraud against consumers. Nonetheless, based on industry experience; anecdotal evidence, expert opinion and other information collected through outreach activities with consumer advocates and members of the e-commerce community; independent research; written comments submitted in response to the Federal Register Notice; and discussion during the workshop, it is reasonable to conclude that, thus far, the benefits provided to consumers by the procedures in the provision outweigh the burdens imposed on electronic commerce.
Consumer advocates suggest that Section 101(c)(1)(C)(ii) may prevent deception and fraud before it occurs by giving consumers more information about the legitimacy of the business they are dealing with and alerting them to the importance of receiving electronic documents. Businesses that have implemented Section 101(c)(1)(C)(ii) also report benefits, including protection from liability, increased revenues resulting from increased consumer confidence, and the opportunity to engage in additional dialogue with consumers about the transactions.
Although the record indicates that Section 101(c)(1)(C)(ii) causes some burdens, a number of commenters stated that the added step to obtain the consumer's consent is not significantly burdensome. To the degree they identified burdens, there is insufficient data to quantitatively assess their likelihood or severity, or their impact on consumers and e-commerce businesses. In addition, the record suggests that some burdens, such as the added step created by the consumer consent provision in Section 101(c)(1)(C)(ii), may be resolved or minimized over time as businesses and consumers adjust to the consent procedure and gain experience sending and receiving documents in an electronic form. In addition, given the pace of technological development, there is reason to believe that some issues, such as technical incompatibility in file formats, will be resolved by existing or future technology.
Similarly, instances of consumer frustration or confusion and the potential for loss of business may be solved by the creative structuring of the consent provision. For example, solutions may include incorporating the consent procedure of Section 101(c)(1)(C)(ii) in documents that must be legally executed at the beginning of the relationship (such as an on-line brokerage agreement) or initiating the relationship with a consumer using electronic mail that requires a response. The technology-neutral language of the provision encourages creativity in the structure of business systems that interface with consumers, and provides an opportunity for the business and the consumer to choose the form of communication for the transaction. Moreover, as allowed under Section 104 of the Act, federal regulatory agencies and states can issue regulations to provide guidance about the implementation of ESIGN in specific industries.(47) These regulations may resolve many of the issues that have surfaced since ESIGN was enacted.
Section 105(b) also requires Commerce and the FTC to address the issue of whether the absence of Section 101(c)(1)(C)(ii) would cause an increase in consumer fraud. While it is difficult to measure whether the lack of a provision would produce a certain result, we believe that the presence of the provision will help prevent deception and fraud. ESIGN's consumer consent provision ensures that consumer protections that exist in traditional commercial transactions extend to business-to-consumer electronic transactions. ESIGN overlays, rather than preempts, state and federal laws that provide for consumers to receive certain information "in writing" in connection with a transaction, thereby preserving consumers' rights under those laws in the world of e-commerce transactions.
The consumer safeguards adopted by Congress in ESIGN are consistent with well-established principles of consumer protection law. A keystone of consumer protection law is to ensure that the consumer can receive accurate information necessary to decide whether to enter into a particular transaction. The information must be delivered in a way that is timely and clear and conspicuous. That is, it must be presented at a time and in a way that the consumer is likely to notice and understand.
As enacted, ESIGN gives appropriate consideration to the threat that fraud and deception on the Internet pose to the growth and public acceptance of electronic commerce. It establishes safeguards that can avert many of the abusive practices that marked earlier technological innovations in the marketplace. Most laws protecting consumers against fraud and deception are implemented after fraud has been committed and documented. ESIGN attempts to address fraud before it occurs. Nothing is more likely to undermine consumer confidence in the electronic marketplace than exploitation by unscrupulous marketers, who would take advantage of electronic records and signatures as yet another way to deceive consumers. ESIGN incorporates basic consumer protection principles that will help maintain the integrity and credibility of the electronic marketplace, bolster confidence among consumers that electronic records and signatures are safe and secure, and ensure that consumers continue to receive comprehensible written disclosures required by state or federal law. Section 101(c)(1)(C)(ii) protects consumers who wish to receive electronic records by ensuring that they have access to the same information and protections as consumers who choose to use traditional paper-based transactions.
Section 101(c)(1)(C)(ii)'s consumer consent provision plays an integral role in achieving the goal of ESIGN: to facilitate e-commerce and the use of electronic records and signatures, and to ensure that consumers can access information businesses send electronically, which an underlying law requires to be in writing.
The consumer consent provision in Section 101(c)(1)(C)(ii) appears to be working satisfactorily at this stage of the Act's implementation. Almost all participants in the study recommended that, for the foreseeable future, implementation issues should be worked out in the marketplace and through state and federal regulations. Therefore, Commerce and the FTC recommend that Congress take no action at this time to amend the statute.
DST Digital Signature Trust Co.
Household Household Bank (Nevada), N.A., et al.
Yen** Elizabeth C. Yen, Esq.
** Denotes that commenter also submitted a supplemental comment after the Public Workshop. References in the Report to supplemental comments will be cited as [Acronym] Supp. at [page].
FTC Headquarters, Room 432, 600 Pennsylvania Ave., Washington D.C.
This workshop is part of the Federal Trade Commission ("FTC") and the National Telecommunications and Information Administration's ("NTIA") effort to gather information to report to Congress on the benefits and burdens of § 101(c)(1)(C)(ii) of the Electronic Signatures in Global and National Commerce Act ("ESIGN") which authorizes the use of an electronic record to send legally required information to consumers if the consumer consents or confirms consent "in a manner that reasonably demonstrates that they can access the information." Congress mandated this report under § 105(b) of ESIGN and required the submission of this study by June 30, 2001.
Through this workshop we hope to advance our understanding of the benefits and burdens to businesses and consumers resulting from the consumer consent provision of § 101(c)(1)(C)(ii). The workshop will consist of moderated round table discussions with representatives from industry, government, consumer advocate groups and other interested parties. We hope to foster discussion about best practices in obtaining electronic consent and to allow workshop participants to demonstrate their best practices, and the technologies that are available for companies to obtain consumer consent.
Technology Exhibits: Starting at 12:00p.m. and continuing until the end of the day, attendees may visit technology exhibits in Room 532.
The forum is open to the public, and there is no formal registration process for those wishing to attend.
9:05 - 9:30 Setting the Stage: What are the Issues?
This session will identify the relevant issues regarding § 101(c)(1)(C)(ii) of ESIGN, explore the areas of consensus, controversy and disagreement, and set the stage for the rest of the day's discussion.
A moderated roundtable discussion to explore the legal issues that face all parties when implementing the consumer consent provision found in § 101(c)(1)(C)(ii) of ESIGN.
This moderated roundtable discussion will explore the technology issues and the available software and computer technologies that enable companies to employ the consumer consent provision.
This moderated roundtable discussion will focus on the benefits and burdens to consumers and businesses of ESIGN's consumer consent requirement, set forth in § 101(c)(1)(C)(ii). The workshop will also explore whether the benefits outweigh the burdens.
This will be a moderated roundtable discussion from the standpoint of both businesses and consumers. We will also explore whether similar best practices apply to all industries or whether some are industry-specific.
Public attendees will have an opportunity to ask questions and offer insight on the day's dialogue.
4:55 - 5:00 Closing: What's next?
21. Elizabeth C. Yen, Esq.
1. Pub. L. No. 106-229, 114 Stat. 464 (2000) (codified at 15 U.S.C. § 7001 et seq.).
2. Estimated U.S. retail e-commerce sales for the first quarter of 2001 are from the U.S. Census Bureau, Economics and Statistics Administration, U.S. Department of Commerce release CB01-83, May 16, 2001. They are based on the Standard Industrial Classification (SIC). Estimated U.S. retail e-commerce sales for 2000 are from the U.S. Census Bureau, Economics and Statistics Administration, U.S. Department of Commerce release CB01-28, February 16, 2001. Note that these estimates are not seasonally adjusted. For more information see the Census web site at http://www.census.gov/mrts/www/mrts.html.
3. Estimated e-commerce revenues for selected services sectors for 1999 are from E-Stats, Mar. 7, 2001, Table 3, U.S. Census Bureau, Economics and Statistics Administration, and are based on the North American Industry Classification System (NAICS).
5. Section 101(c)(1)(B). The disclosures include: (1) whether the consumer may request to receive the information in non-electronic or paper form; (2) the consumer's right to withdraw consent to electronic records and the consequences - including possible termination of the relationship - that will result from such withdrawal; (3) the transaction(s) or categories of records to which the consent applies; (4) the procedures for withdrawing consent and updating the information needed to contact the consumer electronically; and (5) how the consumer may request a paper copy of the electronic record as well as what fees, if any, will be charged for the copy. Section 101(c)(1)(B)(i)-(iv). In addition, businesses must provide the consumer with a statement of the hardware and software needed to access and retain the electronic record. Section 101(c)(1)(C)(i).
6. In this Report, we refer to the provision as the "consumer consent provision in Section 101(c)(1)(C)(ii)," to distinguish it from the broader consumer consent provision (Section 101(c)), and the affirmative consumer consent requirement in Section 101(c)(1)(A).
7. 66 Fed. Reg. 10011 (February 13, 2001). A copy of the Notice is attached to this Report as Appendix A.
8. A list of the individuals and organizations we contacted is attached to this Report as Appendix B.
9. All comments are available on the FTC website at: http://www.ftc.gov/bcp/workshops/esign/comments/index.htm and on the NTIA website at: http://www.ntia.doc.gov/ntiahome/ntiageneral/ESIGN/esignpage.html. A list of commenters and the acronym used to refer to each commenter in this Report is attached as Appendix C. The first reference to each comment will include the full name of the organization, its acronym, and the page number. Subsequent references will be cited as "[Acronym] at [page]."
10. The agenda for the Public Workshop is attached to this Report as Appendix D. The transcript of the workshop was placed on the public record and was also posted on the FTC website at http://www.ftc.gov/bcp/workshops/esign/comments/index.htm and on the NTIA website at http://www.ntia.doc.gov/ntiahome/ntiageneral/ESIGN/esignpage.html. References to the transcript will include the name of the workshop participant, the acronym of the organization represented and the page number (e.g., "[Participant]/[Acronym of organization], tr. at [page]").
11. Several participants also provided demonstrations of the technology that has been or could be used by companies to obtain consumer consent for the provision of electronic documents.
12. The Workshop Participant List is attached to this Report as Appendix E.
13. Gallagher/Fidelity, tr. at 125-126; AIA at 1; EFSC at 3-4; Wachovia at 3.
14. The e-commerce businesses noted that the national scope of ESIGN provides guidance to e-commerce businesses regarding interstate electronic transactions by eliminating the problems created by attempts to comply with different state laws. E.g., Gallagher/Fidelity, tr. at 124. The fact that many businesses already are providing (or moving towards providing) information electronically, pursuant to ESIGN's consumer consent provision, suggests that any costs or uncertainties created by Section 101(c)(1)(C)(ii) are unlikely to inhibit this process.
15. One commenter noted that Congress should refrain from revising the consumer consent provision of Section 101(c)(1)(C)(ii) when the United Nations Commission on International Trade (UNCITRAL) Working Group on E-Commerce is expected to complete its work on the development of an electronic signatures law by year end. Baker & McKenzie at 3.
16. Consumers Union (CU) at 3-4; National Consumer Law Center (NCLC) at 2, 3-4; Richard Blumenthal, Connecticut Attorney General (CT AG) at 2, 3-4.
17. Weinberg/NACAA, tr. at 156-57; National Consumer Law Center Supplementary Comments (NCLC Supp.) at 1; MacCarthy/Visa, tr. at 156; Grant/NCL, tr. at 259-60 (public session remark); CT AG at 1-2; CU at 1.
18. Weinberg/NACAA, tr. at 156-57; Saunders/NCLC, tr. at 157.
19. Silanis Technology (Silanis) at 1-2.
20. Weinberg/NACAA, tr. at 147; see also Dayanim, tr. at 135-36.
22. Saunders/NCLC, tr. at 11-12; Yen/Hudson Cook, tr. at 23-24. For example, the FTC's Door-to-Door Sales Rule requires that sellers give consumers three business days to change their mind regarding any purchase that is covered by the rule. See 16 C.F.R. § 429.
23. Hillebrand/CU, tr. at 120; CT AG at 2-3.
28. MacCarthy/Visa, tr. at 156.
30. Dayanim, tr. at 136, 145-46; Buckley/EFSC, tr. at 196; see also Benham Dayanim (Dayanim) at 5.
31. Dayanim, tr. at 136, 145-46; Buckley/EFSC, tr. at 196.
32. Wittie/ICI, tr. at 56.
33. MacCarthy/Visa, tr. at 103, 132; Gallagher/Fidelity, tr. at 124; Winn, tr. at 159.
34. Software & Information Industry Association (SIIA) at 7 & n.4; Selwood Research (Selwood) at 1.
35. Dayanim at 10; MacCarthy/Visa, tr. at 131-32; Gallagher/Fidelity, tr. at 208.
See Wells/b4bpartner, tr. at 127-28.
37. For example, one participant at the workshop suggested that technological difficulties in transferring between a secure website and a file in an Adobe PDF format might encourage firms to shy away from using PDF files for the provision of notices, even though such files might be otherwise preferable because they make it more difficult for anyone to tamper with the contents of the file. Yen/Hudson Cook, tr. at 60-61. See also Wood/Household Bank, tr. at 61.
38. See, e.g., Yen Supp. at 2-3. See also, Wachovia Corporation (Wachovia) at 4; SIIA at 5 (para. 3); Investment Company Institute (ICI) at 4 (the consumer consent procedure might cause merchants to migrate to the most common formats and those (such as HTML) that are the easiest for demonstrating a consumer's ability to access documents, thus chilling alternative models and inhibiting technological innovation).
39. Gallagher/Fidelity, tr. at 125-27, 140-43; see also Wachovia at 3-4; ICI at 3; E*Trade Bank (E*Trade) at 2-3; Yen at 2.
41. Gallagher/Fidelity, tr. at 125-26; see also ICI at 3; E*Trade at 2-3; Wachovia at 3-4.
42. ICI at 3; E*Trade at 2-3.
43. Gallagher/Fidelity, tr. at 142-43.
44. Stafford/Wachovia, tr. at 220.
45. Anderson/FTC, tr. at 139.
46. Buchman/E*Trade, tr. at 170.
47. See e.g., Truth in Lending, Interim Rule and Request for Comments, Federal Reserve System, 66 Fed.Reg. 17329 (March 30, 2001).
48. The electronic marketplace has not been immune from the types of deceptive and fraudulent practices that have plagued the traditional marketplace. The rapid rise in the number of consumer complaints related to on-line fraud and deception bears this out: in 1997, the FTC received fewer than 1,000 Internet fraud complaints through its complaint database, Consumer Sentinel. A year later, the number had increased eight-fold. In 2000, over 25,000 complaints - about 26 percent of all fraud complaints logged into Consumer Sentinel that year - related to on-line fraud and deception. See Prepared Statement of Eileen Harrington, Associate Director of the Division of Marketing Practices of the Bureau of Consumer Protection, FTC, on "Internet Fraud," before the Subcommittee on Commerce, Trade, and Consumer Protection of the Committee on Energy and Commerce, U.S. House of Representatives, May 23, 2001, available at the FTC's website at: http://www.ftc.gov/os/2001/05/internetfraudttmy.htm.

References: § 101
 § 105
 § 101
 § 101
 § 101
 § 101
 § 7001
 § 429