Businesses Seeking Changes to E-Sign Act

Some businesses are expressing concern that the Electronic Signatures in Global and National Commerce Act, the law that gives electronic signatures the same legal weight as written ones, is creating obstacles to e-business, as well as affecting Web site design. And they're asking federal officials to make some changes to it.

The act, also referred to as E-Sign, became law in October, but a provision in the legislation required the Federal Trade Commission and the Department of Commerce to investigate the burdens and benefits of the law's consumer consent provisions and report back to Congress. The two agencies will hold a workshop on Tuesday to examine the issue.

John Buchman, general counsel at Arlington, Va.-based ETrade Bank, a subsidiary of ETrade Group Inc., said the main problem with the E-Sign legislation is the underlying premise that businesses are disinclined to protect consumers.

"There is this concern [among consumer groups that] in our haste to try to save money by not mailing out paper notices, we are going to run roughshod over consumer wishes, when in fact, we have every incentive to do what the customer wants us to do -- otherwise, they will just go to another Internet bank or online brokerage firm," said Buchman. "What would be our incentive to want to get the customer upset with us?"

The Next Battle

Federal agencies, as required by law, are reviewing the consumer consent provision of the E-Sign Act. They will report to Congress later this year.

Business view: E-Sign's language is too soecific and won't keep up with technology. Customers may resent consumer consent requirements

Consumer groups: Consumer protection provisions should be strengthened. Consumers may be at risk due to bad practices.

The law imposes a number of obligations on businesses, including a requirement that a consumer must "reasonably demonstrate" that he can accept materials electronically. If a consumer provides a company with an e-mail address over the telephone or by mail, for instance, the law requires that the consumer must also demonstrate that he can in fact conduct business electronically.

Buchman said he believes that redundancy may annoy some customers.

The E-Sign Act's requirements prompted Wachovia Corp., a financial services company in Winston-Salem, N.C., to make design changes to its Web site, said Ericka Crandall, manager of e-business policy at Wachovia. The company now has an E-Sign notice that spells out consumers' rights under the law. A consumer must first click on that agreement before clicking on the online services agreement.

The problem is that extra clicks aren't good business practice, said Crandall. "Each time a customer has to click, the likelihood of them finishing through that process is greatly decreased," she said.

Moreover, as new services that employ different document formats, such as the Portable Document Format, are put in place, consumers may have to demonstrate their ability to use those documents and again acknowledge thee E-Sign agreement, Crandall said. E-Sign may actually hinder the use of new technology, she argued.

But consumer groups and some state officials are opposing any rollback of the consumer consent provisions, which they say are needed to protect against fraud.

"To the extent that E-Sign Act's requirements impose costs or limit options, the benefits that they confer on both the consumer and overall process seem to be well worth the burdens," wrote Kathleen Hamilton, director of the California Department of Consumer Affairs, in a letter to federal officials last month.

Behnam Dayanim, an attorney at Paul, Hastings, Janofsky & Walker LLP in Washington, who will be a speaker at Tuesday's workshop, said the federal review may be coming too quickly.

"We just finished a bruising battle" over the legislation, said Dayanim. "And it strikes me that people need some time before we go back and try to reopen it."

Dayanim also warned that businesses, in their efforts to roll back some of the E-Sign requirements, could end up with a more restrictive law.

This story, "Businesses Seeking Changes to E-Sign Act" was originally published by Computerworld.

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