WASHINGTON Financial services industry representatives told a House panel Thursday that last years landmark digital signature law has been a bust so far.
The Electronic Signatures in Global and National Commerce Act, also known as the E-Sign Law, was hailed as revolutionary, promising to spur electronic commerce by giving cyberdocuments the same legal standing as their paper counterparts and by making digital certificates or other technologies as valid for contracts as ink signatures.
But industry officials testified before the House Financial Services technology subcommittee that the law had fallen short because of its complex consumer protection requirements, conflicting statutes adopted by states, and other problems. Some urged lawmakers to take swift corrective measures.
Based on our work with various clients seeking to understand and implement the E-Sign Act, including Citigroup Inc., Charles Schwab & Co., and the Securities Industry Association, we believe that, although well intended, the E-Sign Act in its present form fails to deliver on its promises of uniformity, consistency, and legal certainty, said Thomas Crocker, a partner in the Washington office of the Alston & Bird LLP law firm.
Use of the E-Sign Act has been slow to take off, and compliance with it is limited at best, he said. Its embrace by U.S. industry at large has been spotty.
Some witnesses complained that the laws consent provisions which require financial and other companies to get customer permission before electronically sending the mandatory mortgage or other consumer protection disclosures instead of on paper had made e-commerce harder than traditional business.
The E-Sign consent requirements go beyond ensuring that consumers are afforded the same level of protection in the electronic world as in the paper world, and instead impose requirements that have no equivalent in the paper world, said Louis Rosenthal, executive vice president at ABN Amro North America Inc., who spoke on behalf of the Financial Services Roundtable.
Some witnesses focused on the problems that have resulted from conflicting state laws. Under the federal digital signature law, states may choose to enact laws that go beyond, but are consistent with, the E-Sign Law, or they can adopt standards drawn up by the National Conference of Commissioners on Uniform State Laws.
Christopher Roe, vice president of Firemans Fund Insurance Cos., said this leeway for state-to-state disparities makes it difficult for most companies, especially insurance companies, to offer electronic signatures.
While most other financial sectors receive uniform treatment from federal regulators with regard to online transactions, many insurers and agents fear that they have been saddled with inconsistent and conflicting state laws impacting the Internet, said Mr. Roe, who was testifying on behalf of the American Insurance Association.
But a joint study by the Federal Trade Commission and the Commerce Department on the consent provisions, which was required by the digital signature law and released at the hearing, was inconclusive on whether the provisions should be changed.
Consumer advocates and state law enforcement agencies expressed strong support for the reasonable demonstration requirement of the consumer consent provision, and it is too soon to consider updating the law, Eileen Harrington, associate director for marketing practices at the FTC, told the House subcommittee.