Digital signature legislation passes in the House

WASHINGTON - At press time, e-signature legislation passed the House by an overwhelming 426 to 4 vote. S. 761, the Electronic Signatures in Global and National Commerce Act, now moves on to the Senate. The bill is considered a potential boon for e-commerce because it gives electronic contracts the same legal powers as paper contracts. If passed, credit unions would be able to send credit card, mortgage, share draft and other statements electronically. "Credit unions realize that they have to be part of this digital electronic revolution. We wanted to make sure credit unions could do everything other financials could do electronically," said John McKechnie, vice president of legislative affairs for CUNA. CUNA has been a strong proponent of e-signature legislation, he said. Allowing financials to send lending disclosures online, could help credit unions offer members a totally electronic-based online lending solution. Many credit unions have added online lending HTML forms to their Web sites, and even 60-second loan decisioning models, but credit unions often still need to get the member's signature on paper. Some credit unions have found a way around that by framing new member agreements in such a way that the member's initial signature upon joining the CU is enough for any other business the credit union does with the member in the future. The bill also contains some degree of consumer protection. For instance there is a clause that requires consumers "opt-in" to receive disclosures and other documents electronically. The bill also makes clear that consumers won't be forced into the electronic route over time, and can still continue to receive documents on paper. "There was some concern that the lower end of the economic scale could be disadvantaged if financials could move things to electronic based forms without the opt-in," said McKechnie. Record retention was a key aspect of the House bill. If the bill is passed, credit unions will be able to store electronic records of member documents in databases, knowing they have the same legal power as paper documents. Credit unions are going to have to make sure that members choosing the electronic route have the hardware and software to receive such transmissions. This could mean just a test e-mail to members who choose the services. While significant for credit unions and all financials, the bill has far reaching impacts for the business world. Conceivably, businesses could finalize billion dollar mergers electronically. Also, vendors could supply their customers with terms of their contracts online, and bill them online. The bill is being supported by the Clinton Administration. President Clinton issued a statement on the bill prior to its passage in the House, calling the bill "responsible" and saying that the bill would remove barriers to e-commerce while protecting consumers. -pgentile@cutimes.com