We have a question concerning the E-Sign Act. If we scan our initial loan disclosures and e-mail them to our customers, they sign them and send back, do we need to comply with E-Sign?? They are physically signing the papers, didn't know if this might be an issue for us. Please help!!

If you are going to email a disclosure to a customer, you MUST comply with E-SIGN. Otherwise, they didn't officially receive it in compliance with the regulation or the E-SIGN Act.

I'd want to study that some. Because you are sending them the whole package, they have no obligation until they are received, signed and returned to you. This is like a fax. It isn't optimal, but it isn't a digital signature.

If we do have to comply with the E-Sign, can the notice that we give the customers just be something that the bank types up & gives at application? Or is there a standard form that we use?

ESIGN requires you to disclose a number of things about your method of e-delivery of documents. These disclosures can be provided on paper or electronically. After you make these disclosures, you must obtain each customer's consent for electronic delivery of any document that otherwise must be delivered "in writing." The customer's consent must be electronic and it must demonstrate that the customer has mastered the technology that supports the e-delivery.

If this all sounds FAR more complicated than you expected, then you are beginning to understand ESIGN.

We attended a class on this & since we are emailing the disclosures and the customer is physically signing and then sending back to us, that is considered a "hybrid" and does not pertain to E-Sign.

I don't see that opinion supported by ESIGN or RESPA. Read question 3 on pg 3 of HUD's Q & A. It the "delivery" of the GFE that is at stake. RESPA allows the delivery of the GFE by email if you follow the consent & other specific requirements for disclosure under ESIGN. I don't see anything in ESIGN that would support the hybrid theory.

I hope I am wrong - because mgmt wants to deliver the GFE by email.

This is a question & answer that was on our BOL Speedier Lending with E-Disclosures Webinar:

Question: If we email our disclosures to our customers & they print them off, sign them & email or fax them back to us, is that sufficient? We are not talkign loan contracts, we are talking simply disclosures.

Answer: This is the hybrid method I discussed. You are sending disclosures that later consummate the transaction when you receive them back. You have paper with a wet signature. E-SIGN won't apply in this case. You are not substituting bits and bytes for paper, you are using paper. Becuase they print and return them, no demonstrable consent is needed in advance. If they couldn't handle them, you wouldn't have gotten them back.

So you will be requiring that they return a copy of the GFE to you? Are you requiring they sign an acknowledgment that they received the GFE? (since you can't have signature lines on the GFE) BTW, thanks for the info.

Who provided this answer? Have any of the regulators agreed that this technique bypasses ESIGN?

I don't see how delivering an email is the same as paper. The regs require delivery in writing, not receipt and not signed copies (generally.)

I think that it would be acceptable as a secondary source of delivery to speed up the process, but you would still have to drop a copy in the mail. The e-mailed documents unless delivered through e-sign are meaningless.

Does the consumer's consent to accept these records electronically need to be documented?

We have estatement customers sign an agreement; however, we do not have anything similar for loan customers that want to receive disclosures via email.

Many loan disclosures must be provided "in writing." Prior to ESIGN, the only legal way to deliver "written" documents was on paper. Now, since 2000, you have a choice: paper or electrons. For electronic delivery to be legally acceptable, however, you must follow ESIGN's demonstrable consent process before you start. Importantly, the consent must be electronic, not on paper. If you are using paper agreements to authorize e-delivery of statements, you have not satisfied ESIGN's requirements and the statements you are sending are not "in writing" as required by Regs E and DD.

Andy Zavoina with BOL provided the answer to my question regarding the "hybrid theory".

Then we'll have to get Andy to give us a more detailed analysis of the facts & conclusions.

I'm not convinced by what's posted above. The loan regs require delivery. No paper is delivered. Electrons are delivered. ESIGN (relevant portions extracted, adjusted to the current facts & shown below) conveys its "good as paper" seal of approval only when the lender follows the two-step demonstrable consent process.

"...the use of an electronic record to provide or make available [disclosures required by Fed Regs E, Z, DD, etc.] satisfies the requirement that such information be in writing if [ESIGN preconsent disclosures are given] and the consumer consents electronically, or confirms his or her 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 [disclosures required by Fed Regs E, Z, DD, etc.]"

When a customer wants their statement electronically, we send them a PDF document in an email. The document is their "agreement" to receive their statements electronically and also is our test document that they will be able to receive their PDF statements when we email them out.

Our loan documents are different. If someone does want them electronically, we are now sending them an email with a PDF document that contains their password for the password-protected PDF disclosures that follow in a separate email.

Do you feel we have demonstrable consent for both our statement and loan document delivery? I appreciate any help on this.

From what you've posted here, no. You didn't mention how you handle ESIGN's laundry list of pre-consent disclosures and I don't see that you are obtaining the customer's consent electronically in a manner that demonstrates success with your system.

When we send the initial email to the customer, it is in the same format (PDF) as the statment or disclosures - so isn't that proving that our e-delivery process will work when the time comes?

We would be able to track their success with this test email by tracking whether or not we receive the estatement agreement back or if they receive the disclosures.

Is the initial email a sample document or a live statement? Does this document contain all the ESIGN disclosures? If not, how, where & when are they provided?

Do you have an affirmative statement in electronic form wherein the customer requests e-delivery?

The initial email is a document containing an estatement agreement, as well as the ESIGN disclosures.

If the customer signs up for estatement while logged in to internet banking, we do have an affirmative statement in electronic form. However, customers may also sign up for estatements while in person at the bank. In this situation we still do send them the initial email with agreement and disclosures in PDF form...but there is no affirmative statement in electronic form. Is this wrong?

How do you know that the customer:
- has Acrobat installed?
- received the email with the attached .pdf document attached?
- could open the .pdf attachment?
- could read the content of the .pdf attachment?


ESIGN allows you to obtain the customer's consent in a non-electronic manner (such as a wet signature) PROVIDED you also confirm the consent electronically in a manner that demonstrates success with your e-delivery.

Whether you're obtaining consent or confirming it, the customer's electronic actions must prove to you that s/he is capable of receiving, opening, and reading the content of a test document of the type you will use to transmit the e-statements. Until your customers pass this test drive, you do not get the ESIGN seal of approval.

I'm sorry, but I don't see how there isn't proof that they could not open the documents with the necessary software and read it. It was emailed PDF --> They opened the PDF --> Read and signed the disclosure --> Returned it to the bank proving their ability to receive documents in this format.

Richard (or anyone knowledgeable in ESIGN), please explain in a little more detail how this does not comply. We are considering delivering disclosures in this manner for the time being, but are not completely sure if it will be ESIGN compliant.

Section 101(c)(1)(C)(ii) of ESIGN says the consumer must
"consent electronically, or confirm his or her
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."

If the consumer mails or hand-delivers a self-printed copy of the document, this may demonstrate success with your e-delivery system, but it is not electronic and a demonstration in this manner does not precede delivery of the first e-document.

So if I am understanding this correctly, we need to confirm the customer's consent to receive these stmts or disclosures in some electronic format. And it seems some banks fulfill the "consent" and "ability to access" requirements in the same function.

In regards to loan disclosures, if we have the customer reply to our email that they can read and have received the email, will we cover our bases? I'm not sure how else to document customer's consent electronically.

Yes, you need to do three things:
- explain how your e-delivery service works (by giving all the hardware/software, etc. disclosures listed in Sections 101(c)(1)(B) and (C) of ESIGN)
- obtain the customer's affirmative consent to e-delivery
- "test" the customer to be sure s/he can actually use your system--this "test" must be done in conjunction with obtaining consent

It appears that you are "pushing" e-statements and that's also how you plan to deliver loan disclosures. In such a system, a reasonable "test" could be as simple as:
- draft a test .pdf document (include all ESIGN disclosures, anything else the customer might need to know about the pricing or operation of this service, and some kind of PIN or code)
- email this test document to any customer who expresses an interest in e-delivery--include in this message the "mailto" link discussed below
- instruct customer to open attached test document, retrieve the PIN/code, click the "mailto" link, add the PIN/code to the message and the send the message

The "mailto" link would take the following form:
mailto:e-delivery-enrollment@mybank.com?subject=I want electronic statements&body=Please enroll my account for e-delivery of statements. By providing you the code contained in your e-delivery agreement and disclosures, I am demonstrating my ability to open and read documents of the type you will send instead of paper statements. The code is ____________.

When you receive the message, confirm the PIN is correct. When this is done, the customer has proven s/he received your message, opened the test document successfully, and could read the content. Retain a copy of the email from the customer as evidence of the consent (and evidence of compliance with ESIGN.)

If you can embed the mailto link inside the .pdf document, then you can skip the PIN/code. By simply following the direction within the test document, the customer has demonstrated success with your system.

There can be many ways to accomplish what must be done, but the idea is to prove in advance that your customers will be able to open and use e-documents when you begin sending them.

Thanks for your detailed answer Richard, I appreciate it.

Ditto. Thanks for the detailed response!

Richard or Andy or anyone else much more knowledgable of E-sign than me. We are considering a new "green" account that would require e-statements. My first question, is how do we "require" e-statments at account opening and is this permitted under the Reg? Would we capture a signature at account opening that says, "Yes I want e-statements" then have them consent also online before the first statement print? If they don't consent online, we will have already disclosed to them that if they do not complete the estatement registration online, they will be charged a monthly account fee of say $5.00?

I know this is long, but I am just trying to get my brain rapped around this.

Edit Reason: spelling errors and clarify one thought.

Bump?

We offer an account that requires electronic statements. We added that as a miscellaneous term in our TISA disclosure. The customer, though, has to enroll through the consent process we have through our online banking product. That can't happen at the new account desk, it has to take place from the PC the consumer will be using to receive the disclosures. That way they can show us that they have the ability to receive the disclosures. In return for going to an electronic statement, we pay a higher interest rate for this account than we would for a paper statement account. We also monitor this account type to ensure all the customers who have this higher rate have actually enrolled for e-statements. If they haven't, we'll convert them to the lower paying interest rate account. It looks like you would like to charge a fee if they haven't enrolled. You can do that, you just have to disclose it (after 30 days if you haven't completed the process to receive your statements electronically we will charge you a monthly fee of $xx, etc.)

It sounds like you have your bases covered. If you substitute the e-statement for paper, and the e-statements contains disclosures you have to give in writing, E-Sign applies. As is noted, you can get their intent at opening, but you need a sound demonstrable consent procedure that verifies they can receive your email, get to their statements and read them.

So, if the process fails, what will you do? That is where you have disclosed a backup account that will trigger a fee or whatever, the higher cost of this other account. So you'll be making E-Sign disclosures and new account disclosures and you may need to restate those new account disclosures as they'll vary fom teh e-statement account, unless you clearly make both at opening with the trigger details. I'd research that more prior to implementation, but that should be fine.

You need that backup account plan anyway, because they are free to change at any time.

It was stated in this thread that Andy Zovinia gave the above answer.

Andy, our Mortgage department seems to be going by this "hybrid" method but I can't find any support for this method. From what I'm reading is the emailed disclosures should be compliant with ESIGN. Can you elaborate or direct me to your support for this hybrid method? I appreciate your feedback.

We have the E-signature disclosure for e-statements and online loan applications. We are in the process of implementing an online bill pay product with an outside vendor. We have an agreement for that product with all the cut off times, types of bills and amounts we won't pay, etc. The vendor will allow customers to set up a means of communicating to the customer and vice versa.

I don't see where, for this product, we need the E-sign document. No bank required written notices will be sent electronically. (customers wanting the service must sign up for the bank's transactional website, however.

Am I missing something?

ESIGN only comes into the picture when federal law requires you to deliver disclosures or some other document "in writing" and you want to use electrons instead of paper for the delivery.

Thank you Richard. That confirms things for me.