As most of you know, I talk with members of our industry almost daily about their compliance concerns. One topic that comes up regularly is E-Sign – it’s just something people have a hard time understanding. Frankly, if your agency has no plans to text or email consumers, then I suppose there is no reason for you to understand all the intricacies of E-Sign. But if you do plan to use these forms of digital communication to send letters and notices to consumers, you MUST nail the E-Sign requirements.
Here are five common misconceptions that I run into regularly when talking with clients:
Myth No. 1 – E-Sign means Email signatures.
This may come as a shock, but E-Sign does not mean email, Reg E or electronic signatures. E-Sign is the acronym for the Electronic Signatures in Global and National Commerce Act (E-Sign) (Pub.L. 106–229, 114 Stat. 464, 15 U.S.C. ch. 96). Enacted June 30, 2000, this long-awaited Federal law, legitimized electronic documents and created a process for electronic signatures by ensuring the validity and legal effect of contracts entered into electronically. For those of you who are really into E-Sign, you can celebrate National E-Sign Day every year on June 30.
Myth No. 2 – State Laws Override E-Sign.
Although every state has at least one law pertaining to electronic signatures, it is the federal law that lays out the guidelines for interstate commerce. The general intent of the E-Sign Act is spelled out in the very first section (101.a), that a contract or signature “may not be denied legal effect, validity, or enforceability solely because it is in electronic form.” This simple statement provides that electronic signatures and records are just as good as their paper equivalents, and therefore subject to the same legal scrutiny of authenticity that applies to paper documents.
Myth No. 3 – If I have the consumer’s consent to email, I have E-Sign consent.
Huge no. There is a very important provision in the E-Sign Act which is often overlooked. It pertains to the type of consent you need to obtain if you intend to substitute the delivery of a legally required written notice or document to the consumer using an electronic form such as email or text.
Myth No. 4 – I need E-Sign consent to send a consumer an email.
Sorry. Wrong again. You need E-Sign consent to substitute a wet pen and ink signature for a digital signature or to substitute the electronic delivery of a legally required written notice or document for delivery by first-class mail.
Myth No. 5 – Rather than messing with the consent, I will just tell the consumer they can opt out.
Now we are in dangerous territory. I remind people we can never say the two words “opt” and “out” together in a sentence when we are talking about E-Sign. This is because you cannot ask consumers to opt out of something they never gave, and you never had. You have an affirmative duty to provide consumers with an explanation of their rights before you can ask them for consent to provide them legally required written disclosures, notices and documents electronically.
Determining When E-Sign Consent is Required
E-Sign makes clear, when it comes to the delivery of a disclosure, notice or document that is required by law to be provided in writing, you can only do so if the consumer agrees to this form of delivery after you have provided them a reading of their rights. Think of it in these terms. If a police officer questions a suspect in custody without first reading this person their Miranda rights, any statement made is presumed to be involuntary, and cannot be used against the suspect. It’s the same with E-Sign. If you want to send legally required disclosures, notices and documents to a consumer that are required by law to be provided in writing; you need to read the consumer his rights and then ask them for consent.
The consumer must provide affirmative consent, meaning that it cannot be assumed that a consumer has given consent simply because he/she has not chosen the option to deny consent, or has not responded to an option to grant consent.
E-Sign SEC. 101. (c) CONSUMER DISCLOSURES explains the information you must provide the consumer to secure E-Sign consent [i]. I’ve included the requirements for your reference at the end of this blog. To give you an idea of a script you and your attorney can edit to solicit the consumer’s E-Sign consent, I provide the following:
Collector: Hi Amy, I’m glad we could set up the preauthorized electronic funds transfer payments. But before we can send you your post-dated payment reminders by email/text I have to make sure you will be able to receive the information we send and understand your right. Do you mind listening for a few seconds?
Amy: Yes, that’s OK.
Collector: Great. Sometimes the kinds of documents that we must send you require us to obtain your consent to send them electronically.
Granting consent to receive this information electronically applies to the following debt or debts (list debt(s)).
You can withdraw this consent at any time by calling us at xxx-xxx-xxxx and we will mail you the required information in the future. (Include a statement here that describes if the agency will charge or not charge a fee for obtaining this information in a paper form)
To ensure we always have your proper email address, you can update your contact information by calling us*, visiting our website* or sending us an email*. (An agency could do this via text if the agency has this ability, texting laws will apply.)
The hardware and software requirements to access and obtain records are … (example: you are required to have Adobe Acrobat).
To confirm that you can receive the information electronically I am going to send you an email.
Please reply to me so I know this is a good address for you.
(Note: if you disclose the information via web, the consumer must confirm their ability to use the web; if you disclose the information via email, they must confirm their ability to use that email address; if you disclose the information using text, they must confirm their ability to use text.)
Amy: OK, I received your email and sent a reply to you.
Collector: Great. Got it. We are good to go. Remember, if you have any questions for me at any time about any thing we have discussed you may call our office Monday through Saturday between the hours of 8:00 a.m. Central and 6:00 p.m. Central.
More to Come
In my next blog I will provide you with examples of disclosures, notices and documents that may trigger E-Sign. Keep in mind, one of the leading organizations in our space representing collection agencies has formally requested the CFPB to provide an exemption from E-Sign. Only time will tell. In the meantime, a prudent course of action would be to embrace E-Sign, use it to your advantage and throw your stamps away.
Words of Advice
Please read the case Lavallee vs. Med – 1. This case is on appeal in the 7th Circuit. The CFPB filed an Amicus Curia brief which clearly explains how and when E-Sign can be used in a debt collection environment.
[i] E-sign SEC. 101. (c) 1) CONSENT TO ELECTRONIC RECORDS. —Notwithstanding subsection (a), if a statute, regulation, or other rule of law requires that information relating to a transaction or transactions in or affecting interstate or foreign commerce be provided or made available to a consumer in writing, the use
of an electronic record to provide or make available (whichever PUBLIC LAW 106-229-JUNE 30, 2000 114 STAT. 465 is required) such information satisfies the requirement that such information be in writing if—
(A) the consumer has affirmatively consented to such use and has not withdrawn such consent;
(B) the consumer, prior to consenting, is provided with a clear and conspicuous statement—
(i) informing the consumer of (I) any right or option of the consumer to have the record provided or made available on paper or in nonelectronic form, and (II) the right of the consumer to withdraw the consent to have the record provided or made available in an electronic form and of any conditions, consequences (which may include termination of the parties’ relationship), or fees in the event of such withdrawal; (ii) informing the consumer of whether the consent applies (I) only to the particular transaction which gave rise to the obligation to provide the record, or (II) to identified categories of records that may be provided or made available during the course of the parties’ relationship; (iii) describing the procedures the consumer must use to withdraw consent as provided in clause (i) and to update information needed to contact the consumer electronically; and (iv) informing the consumer (I) how, after the consent, the consumer may, upon request, obtain a paper copy of an electronic record, and (II) whether any fee will be charged for such copy; (C) the consumer— (i) prior to consenting, is provided with a statement of the hardware and software requirements for access to and retention of the electronic records; and (ii) 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; and (D) after the consent of a consumer in accordance with subparagraph (A), if a change in the hardware or software requirements needed to access or retain electronic records creates a material risk that the consumer will not be able to access or retain a subsequent electronic record that was the subject of the consent, the person providing the electronic record— (i) provides the consumer with a statement of (I) the revised hardware and software requirements for access to and retention of the electronic records, and (II) the right to withdraw consent without the imposition of any fees for such withdrawal and without the imposition of any condition or consequence that was not disclosed under subparagraph (B)(i); and (ii) again complies with subparagraph (C).
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