Easier E-Sign Proposed by U.S. Senate

Without giving an in-depth civics lesson, it is somewhat a lengthy process for a bill to become a law.  Not every bill that is introduced in the House or Senate eventually become a law, and those that do, often change significantly from when they were introduced. This is just sort of how it is done in America. So, without further ado, the “E-Sign Modernization Act of 2022” was introduced recently into the U.S. Senate as S.3715. It still needs to pass a vote in the Senate, and the House, and be signed by the President, but the proposed changes are significant. What is proposing to be “modernized” about E-Sign has to do with the demonstrable consent requirement, which would be removed from the E-Sign requirements under the E-Sign Modernization Act of 2022.

Under E-Sign as it currently exists there are both notice and consent requirements. In order to send a customer documents electronically, the bank must provide a notice to the customer that includes 1) whether the consent applies only to a particular transaction, to specific categories of records (disclosures, periodic statements, etc.), or to the customer’s entire relationship with the bank, 2) option to receive any records in paper form, how to request a paper copy, and any fees associated for paper copies, 3) the right to withdraw consent, how to withdraw consent and the consequences of doing so, 4) the procedures for the customer to update their electronic contact information, and 5) a description of the hardware and software requirements to access and retain electronic records. 

After providing the required notice, the customer must affirmatively consent to the receipt of electronic records. There are two parts to this customer consent: 1) the customer must affirmatively consent to receiving electronic records. This normally accomplished by the consumer by signing or checking a box next to language such as, “I request [the bank] provide me with [description of the documents] in electronic format.” 2) the customer must also consent electronically or confirm his/her consent electronically in such a manner that reasonably demonstrates to the bank that the customer can access the information in the electronic form that will be used to provide the information that is the subject of the consent. This part of the consent (or a confirmation of the consent) must be provided to the bank electronically. It could be emailed or submitted to the bank’s website by the customer, but it cannot be completed only in paper form and mailed to the bank without some form of electronic confirmation. 

It is this second part of the consent requirement, the demonstrable consent requirement that is proposing to be modernized. According to the bill’s sponsors, demonstrable consent is an outdated requirement that is no longer necessary given advancements in technology since E-SIGN became law in the year 2000. The E-Sign Modernization Act would remove this requirement, so once a consumer is provided with disclosure information and consents to receiving documents electronically, he or she can obtain them through those means without having to prove that they can receive the documents in the format the bank will be sending them.

What is the likelihood of this bill becoming law? Only time will tell, but this change would be big for banks, so we’ll watch S.3715 with great interest and keep you updated of any changes to the law.