U.S. Agencies Say E-Signature Law Is Doing the Job

The U.S. Federal Trade Commission (FTC) and the Department of Commerce released a report Wednesday recommending that Congress take no action to amend the digital signature law, also known as the Electronic Signature in Global & National Commerce Act (ESIGN), which was signed by President Bill Clinton a year ago.

“It is reasonable to conclude that, thus far, the benefits of the consumerconsent provision of ESIGN outweigh the burdens of its implementation onelectronic commerce, and that the provision appears to be workingsatisfactorily at this stage of the Act’s implementation,” the agencies’ report said.

However, the report also noted that not enough time has passed for consumers and businesses to experience the effects of the law or to determine if the implementation of ESIGN has led to an increase in online consumer deception and fraud.

In addition, the agencies said that more time is needed to conduct acomplete quantitative analysis of the digital signature law.

Minimal Impact

ESIGN was enacted to facilitate the use of electronic records and signaturesin Internet commerce by ensuring the validity and legal effect of contractsentered into electronically.

The report identified a potential “burden” on commerce caused by ESIGN’sreasonable demonstration requirement, which states that consumer informationthat must legally be in writing — such as product recalls or terms of credit — cannot be sent to consumers electronically unlesseach consumer consents to receive the information electronically.

“Consumer consent provisions only apply to laws that require written noticesbe sent to consumers, so generally it does not apply to the electroniccontract of the sale of goods,” John Morgan, an attorney specializing in e-commerce for the Seattle, Washington firm of Perkins Coie LLP, told the E-Commerce Times.

“For most e-tailers, this is not going to have an impact,” Morgan said.

Writing on Wall

Morgan also said that more heavily regulated industries, such as onlinebrokerages or banks that must satisfy the written notification requirementsof truth-in-lending laws, might have more to do in order to comply with the reasonable demonstration requirement than typical e-tailers have to do.

“Given that the FTC mandate is to protect against unfair trade practices,it’s not surprising they’d find provisions protective of consumers to bebeneficial,” Morgan said. “Lacking some pretty concrete statistics orevidence that commerce is harmed or excessively burdened, [the agencies] would be unlikely to suggest a lessening of the rules.”

Five Easy Pieces?

Under ESIGN, businesses and individuals can legally sign everything fromcontracts to mortgages over their computers and the Internet, potentiallyreducing hassles and allowing e-commerce firms to offer expanded convenienceto customers. However, the law has proven difficult for e-tailers to implement ona regular basis.

First, the seller or provider of service must inform customers that digitalsignatures are accepted and convince them to use the technology.

Then, the company has to ensure that the customer has the appropriatesoftware to even use a digital signature. Next, if the customer so demands,the company has to supply a hard copy anyway.

The company also has to specify whether the customer’s digital signature isfor one sale or a series of sales. If it is for one sale, the company has tosend the customer verification that the digital signature is only being used once.

1 Comment

  • Air Cargo, the world’s most critical transportation event has been slow to adopt electronic, legally binding signatures on the internet to execute contracts. The Air Transportation industry is however very well aware that giant shippers like GE are going digital. In order to participate in the global trade process, carriers, shippers, forwarders, brokers and support industries (insurance, trucking, warehousing, banks) must initiate evolutionary changes to the way they do business or be left behind. The Internet is all about communication and relying on the phone/fax to conduct trade will condem the unbelievers to a bleak and costly future of “doing business the old way”.

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