ESIGN Reminders

8/22/17

The Electronic Signatures in Global and National Commerce Act of 2000 (“ESIGN”) promotes the use of electronic signatures and records in commercial transactions by granting them the same legal validity and enforceability as paper records and handwritten signatures.

When credit unions are required by law or regulation to make information available to a consumer in writing, the information can be delivered electronically as long as the credit union complies with ESIGN’s requirements. The federal ESIGN statute doesn’t affect the content or timing of any disclosures required to be provided to consumers by the Truth in Lending Act, Truth in Savings Act, Electronic Fund Transfers Act, or any other consumer protection laws.

Pre-Consent Disclosures

ESIGN requires “affirmative consent” to conduct business electronically — in other words, consent must be a voluntary “opt-in.” Businesses cannot convert consumer accounts to online accounts without first obtaining consumers’ affirmative consent.

Prior to consenting, consumers must be provided with a clear and conspicuous statement informing them of their rights regarding the transaction, as well as a statement of hardware and software requirements for access and retention of electronic records.

There are also subsequent disclosure requirements when changes to hardware or software create a “material risk” that the member will not be able to access or retain an electronic record of the transaction. In this case, the credit union would have to provide the member with a statement of the revised hardware and/or software requirements, as well as the right to withdraw consent without the imposition of any fees or conditions not originally disclosed.

Affirmative Consent

Once the pre-consent disclosure requirements are satisfied, a consumer must consent electronically, or confirm his or her consent electronically in a manner that “reasonably demonstrates” that s/he can access information in the electronic form that will be used to provide the information that is the subject of the consent.”  So, the member has to do more than click “I agree” to receive online disclosures. The credit union’s consumer consent process must also include a method for members to “demonstrate” that they can access the required disclosures in the electronic format that the credit union plans to utilize.

Record Retention

An electronic record will satisfy a statute or regulation’s record-keeping requirements if the record accurately reflects the information in the contract or other record; and remains accessible to anyone who is legally entitled to access, in a form that is capable of being accurately reproduced for later reference (whether by transmission, printing or otherwise). ESIGN doesn’t prescribe how long to keep records available online. [The Federal Reserve Board’s previous electronic communication regulations (eliminated in 2007) required retention of electronic disclosures posted on a website for at least 90 days.  But, these provisions no longer exist.]

Note that ESIGN does not apply to:

  • Wills, codicils, or testamentary trusts;
  • Laws governing adoption, divorce, or other matters of family law;
  • All articles of the UCC (except Section 1-107, Section 1-206 and Articles 2 and 2A);
  • Court orders or notices, or official court documents (including briefs, pleadings, and other writings) required to be executed in connection with court proceedings;
  • Any notice of: (1) the cancellation or termination of utility services (including water, heat, and power); (2) default, acceleration, repossession, foreclosure, or eviction, or the right to cure, under a credit agreement secured by, or a rental agreement for, a primary residence of an individual;(3) the cancellation or termination of health insurance or benefits or life insurance benefits (excluding annuities); or (4) recall of a product, or material failure of a product, that risks endangering health or safety; or
  • Any document required to accompany any transportation or handling of hazardous materials, pesticides, or other toxic or dangerous materials.

What about state law?

ESIGN generally preempts state e-signature laws, except with regard to a state that has adopted the Uniform Electronic Transactions Act (UETA) as approved by the National Conference of Commissioners on Uniform State Laws (NCCUSL). If a state’s legislature has made any exceptions to the scope of UETA, these exceptions will be preempted by the federal statute to the extent that they are inconsistent with ESIGN.

Both UETA and ESIGN validate the use of electronic records and signatures. However, since they are not identical, credit unions should contact their state league or association regarding any additional UETA requirements.

This is just a snapshot of ESIGN for “back-to-basics” purposes. For more detailed information, including FAQs, please visit CUNA’s e-Guide, accessible via the Compliance Resources drop down menu on CUNA’s Compliance Community (compliancecommunity.cuna.org).

Source:  CUNA Compliance Community

Question of the Week

If a credit union pays a post-dated check early, is it liable for any NSF fees the member incurs?

No, unless the member gave notice of the postdating that described the check with reasonable certainty. The credit union can charge the check against the account if it is properly payable, even though the payment was made before the date of the check. The member must give the credit union reasonable opportunity to act. If this occurs and the credit union charges against the account before the date stated in the notice of postdating, the credit union is liable for damages for any loss resulting from its act. Therefore, without a notice of postdating to the credit union, the credit union can pay the check early and is not required to reimburse the member for any fees.

Resources

RCW 62A.4-401(c)

ORS 74.4010 (3)

IS 28-4-401

Legal Briefs

National Credit Union Administration (NCUA)

The NCUA issued a proposal seeking input on a regulatory reform package designed to provide regulatory relief while not undermining safety and soundness.

The NCUA announced that it has released the August 9th webinar it hosted on its proposed plan to close the Temporary Corporate Credit Union Stabilization Fund.

The NCUA released the video of its July Board Meeting.

Consumer Financial Protection Bureau (CFPB)

The CFPB released a report that found that the amount of debt that borrowers leave school with has doubled over the past decade.

Federal Reserve Board (FRB)

The FRB released the Federal Open Market Committee Minutes from the July 25th meeting.

The FRB announced that it has revised its Operating Circular 4, Automated Clearing House Items, to incorporate Phase 2 implementation of the Same Day ACH rules.

Federal Trade Commission (FTC)

The FTC announced that it will increase the cost for telemarketers to access the Do Not Call Registry in 2018.

Office of the Comptroller of the Currency (OCC)

The OCC announced that it updated its Bank Accounting Advisory Series. The update incorporates FASB standards.

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of August 17, 2017. The last update prior to this was August 16, 2017.

Questions? Contact the Compliance Hotline: 1.800.546.4465, compliance@nwcua.org.

Posted in Compliance News, Compliance News, CUNA.