Digital Signature Bills Move to Front Burner

WASHINGTON - Lawmakers have accelerated action on digital signatures legislation, scheduling a conference committee meeting on the bill for today.

Financial services industry lobbyists - who have pushed hard for legislation to make contracts signed online as valid as hard copies - scrambled Tuesday to respond to a Republican compromise offer.

Five top Republicans - including Senate Banking Committee Chairman Phil Gramm and House Commerce Committee Chairman Thomas J. Bliley Jr. - began circulating their 27-page agreement late Monday. It generally leans toward the House bill adopted last November that was favored by industry, prompting upbeat reaction from lobbyists.

"This is, with some modifications, going to be the foundation for the conference report,'' which will reconcile the differing House and Senate versions, predicted Jeremiah S. Buckley, counsel to the Electronic Financial Services Council.

"We are very optimistic that progress is being made on it, and that it has an excellent chance of enactment in the not-too-distant future," said Edward L. Yingling, chief lobbyist for the American Bankers Association.

It was unclear whether the conference committee, chaired by Rep. Bliley, would vote Wednesday or merely discuss the compromise plan.

Simultaneous progress on digital signatures and bankruptcy reform has reignited expectations that the two pieces of legislation will be linked. Republicans are hoping that President Clinton, who has threatened to veto the bankruptcy legislation but wants a digital signatures bill, will be pressured into signing the combined legislation.

Republican leaders want to pass digital signature and bankruptcy compromises in the House and Senate by May 26 when Congress is scheduled to adjourn for a week of Memorial Day vacation. However, Senate Democratic leaders told ABA officials Tuesday that their deadline is July 4, Mr. Yingling said.

Democrats had little to say about the Republican proposal on digital signatures Tuesday, but have insisted in the past that any deal must adequately protect consumers and state laws.

The Clinton administration was also mum Tuesday, but its views are expected to become clearer in the next few days. Andrew J. Pincus, general counsel for the Commerce Department, and Gregory A. Baer, assistant secretary for financial institutions at the Treasury Department, are scheduled to speak Thursday and Friday, respectively, to an Electronic Financial Services Council conference.

Meanwhile, Sen. Spencer Abraham, R-Mich., a co-sponsor of the legislation, is scheduled to deliver a luncheon speech on Thursday to the group. Overall, the compromise appears to move in the industry's direction.

Unlike the House bill, the Senate bill adopted in November included no provisions to let financial services companies make mortgage and other disclosures required by federal consumer-protection laws electronically instead of on paper.

Republicans largely borrowed provisions from the House version that would permit electronic delivery of these disclosures, provided that consumers affirmatively give consent, are given a "clear and conspicuous" statement of any fees and the right to change their minds, and are given an explanation of computer requirements for getting and saving records of the information.

Companies would have to keep accurate records of transactions and make them available to customers as under current law, but electronic records would satisfy legal requirements. For example, checks could be retained electronically but only if information on both the front and back of checks were maintained.

A major bone of contention was which documents may not be sent electronically.

Consumers would have to receive default notices, foreclosure notices, cancellation of health and life insurance benefits, and other sensitive documents in paper form.

However, the bill would require the Commerce Department to issue a study within three years of enactment. If the Commerce secretary found the exclusions were unnecessary, then regulators could override them.

Questions about federal preemption of state laws remain. Financial companies successfully urged Republicans to prevent states from passing laws that set differing technology standards for electronic signatures and disclosures, but Democrats are expected to fight for state attorneys general who are concerned the law could undermine their consumer protection laws.

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