Have you heard about Schrodinger’s cat? It is a famous thought experiment where a cat is put into a box with a flask of poison, an internal monitor, and a radioactive source. The experiment was designed to show that once the cat goes into the box, the state of the cat is unclear until it can be determined. Demonstrable intent must similarly be shown or demonstrated.
The E-SIGN Act, or Electronic Signature in Global and National Commerce Act, created a system of ensuring that electronic signatures, contracts, and records are valid and enforceable if they meet certain criteria. The E-SIGN Act requires the bank to obtain consumer consent before sending any disclosures or notices electronically. It requires the bank to do the following:
- Inform the consumer of any right or option to have the record provided or made available on paper;
- Explain what transactions and notices the consent pertains to;
- Describe the procedures a consumer must use to withdraw consent and update contact information;
- Inform the consumer how to obtain paper copies after consent is received and what fee is associated with them
- Before consenting – provide the consumer a statement of hardware and software requirements for access and retention of the electronic record. (See link for more details)
Once this information is provided to the consumer, they must “consent electronically, or confirm [their] 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.” (see §101(c)(1)(C)(ii)) In other words, the bank must show demonstrable consent by the consumer, and the consumer must agree to receive documents electronically and must consent in a manner that both a) demonstrates that they can access the documents electronically, and b) provides the consent in an electronic format.
As an illustration, if a Bank wishes to provide customers with electronic PDF statements, one of the ways a bank could obtain demonstrable consent is by requiring the customer to first open a pdf to consent or confirm electronic delivery. In receiving and responding to this initial request, the customer reasonably demonstrates they will be able to access the records that were agreed to be sent electronically.
What does this have to do with Schrodinger’s cat? To know if the cat is alive or dead, the box must be opened. The same is true with demonstrable consent. Even if the bank has received a notarized-hand-written-authorization, permitting the records to be electronically sent – under E-SIGN – the bank and their regulator cannot know if the customer has received and has access to the record sent, without them demonstrating they were able to do so. Using our PDF example, they must open that first PDF to show they have the reasonable ability to open any PDF.
The bottom line of demonstrable consent is this, the customer must prove to the bank that they can receive and view the electronic records BEFORE the bank sends them.