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#1685266 - 04/03/12 06:04 PM Demonstrable Consent
JBanker28 Offline
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Our bank is not in compliance with E-Sign and we are working on cleaning up the issue of verifying demonstrable consent for our customers ability to statements from home.

If we sign a customer up for e-statements at account opening, but the customer does not ever verify their ability to pull the electronic statement, then we will switch the customer to paper only and charge a fee for the statement. Our "paper package" and our "e-package" have different fees. The paper is more expensive. (The e-package does include 2 paper statements for free). If we move a customer to the "Paper Package" (a separate account type) after the 2nd statement, then I've recommended a new TIS disclosure be mailed to the customer indicating the increase in fees. This process is explained at account opening but there is nothing in writing. My question is, do we need to provide the new TIS disclosure 30 days before we increase the fee? Or is their lack of ability to properly use this type of account a valid reason to increase the fee without 30 days notice?

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#1685268 - 04/03/12 06:10 PM Re: Demonstrable Consent [Re: JBanker28]
JBanker28 Offline
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This is included in our e-statement agreement:

I will provide (BANK) with a signed, written notice if my electronic mail (e-mail) address changes. (BANK) will make every reasonable effort to contact me if the E-Statement is deemed undeliverable; however, if email delivery continues to be unsuccessful, (BANK)may terminate this agreement, whereby a paper statement will be sent to the address of account(s). Depending on the type of account you have, termination of this agreement may require us to switch your account to a new account type that may have a different fee schedule.

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#1685349 - 04/03/12 08:09 PM Re: Demonstrable Consent [Re: JBanker28]
John Burnett Offline
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Second post first -- The verbiage you quoted unnecessarily ties the bank to a course of action that it is not required by law to take. You've ported your paper-statement paradigm to the e-statement environment when there is no legal compulsion to do so. You could replace it with a statement to the effect that the customer bears the responsibility for receiving and reviewing the statement and other disclosures, and doing so can help protect the account from fraudulent transactions. You can even say the bank will make reasonable attempts to contact the customer if e-delivery fails, but it remains the customer's responsibility to keep the bank informed as to the current email address.

Don't forget that sometimes email bounces simply because the addressee has failed to clean out his inbox. And sometimes it's simply an isolated glitch that is fixed a day later.

As for your first post, why not simply provide the fee information on the "paper package" with the "e-package" disclosures. Then you may decide to remind the non-conforming customer of the fee when you move the account back to paper, but you won't have to give advance notice.
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#1685470 - 04/04/12 12:51 PM Re: Demonstrable Consent [Re: JBanker28]
Andy_Z Offline
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I agree with John. As I read the original post, the consumer signs up and desires eStatements. The consumer then fails to follow through with demonstrable consent. If this is beginning to be a problem, disclose both accounts, denote the fee difference and this may incent the consumer to complete that process as well as make all disclosures. Be sure to indicate a completion date.
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#1685512 - 04/04/12 02:00 PM Re: Demonstrable Consent [Re: JBanker28]
Richard Insley Online
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I'm confused.

This thread begins by describing a "pull" delivery system and then wanders off into an irrelevant discussion of email. Having a working email address is nice, but hasn't been a regulatory requirement for years. Unless the bank considers email notification critically important to this e-delivery system, forget it. Make the system into a self-serve process where the account agreement announces the statement cycle and the customer bears the responsibility to pull his/her statement when the time arrives. Such a no-frills system is easy to operate and ESIGN will require only a test of the customer's ability to pull a test document.

In order to increase the likelihood customers will follow through and complete the consent/demonstration (test drive) when they get home, pay them. Deposit $10 into the account as soon as consent occurs.

I agree with Andy & John--disclose both pricing possibilities up front, including the "signing bonus."
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#1685539 - 04/04/12 02:39 PM Re: Demonstrable Consent [Re: JBanker28]
Soccer Offline
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We have in the past always referred our customers to our website when they have wanted to sign up for E-Statements, now in an effort to cut postage costs the operations/IT department has developed a paper enrollment form with disclosures to encourage more E-Statements. Can we allow the customer to sign up on paper in the branch and then do the consent/demonstration after the fact? I'm just concerned that people will say they have the correct systems but have no idea if they do, specifically, bullet 10 of E-sign disclosure and consent.
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#1685542 - 04/04/12 02:43 PM Re: Demonstrable Consent [Re: JBanker28]
John Burnett Offline
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It's acceptable to have the customer sign up in person in your branch. But the demonstrable consent piece can only be done by the consumer using the equipment and software the consumer will use to access the disclosures/statements. That could be at the branch if the consumer is using his/her laptop or tablet. Otherwise, it would have to be at the consumer's home or office (or at some other Internet access point the consumer can use that's not a bank terminal or machine).
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#1685546 - 04/04/12 02:48 PM Re: Demonstrable Consent [Re: JBanker28]
Soccer Offline
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Thank you!
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#1685561 - 04/04/12 03:04 PM Re: Demonstrable Consent [Re: Soccer]
Richard Insley Online
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Originally Posted By: Soccer
sign up on paper in the branch and then do the consent/demonstration after the fact?
ESIGN views confirming consent electronically as the equivalent of giving consent electronically. Either way, you cannot legally substitute electrons for paper until your customer passes the test.
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#1685667 - 04/04/12 04:48 PM Re: Demonstrable Consent [Re: JBanker28]
Soccer Offline
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Additional assistance please! I am now being told(Dep Ops) that the customer's consent when they first sign up for internet banking, and don't need to do it again. I don't see it that way, anyone can sign up for internet banking and never receive any online statements. I understand the act that if a customer is to receive electronic statements or disclosures, even if they have been an internet customer for years, they still must content to that specific act. (being able to receive the statements). Am I confused?
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#1685734 - 04/04/12 05:58 PM Re: Demonstrable Consent [Re: JBanker28]
Andy_Z Offline
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If your original agreement includes eStatements, you're good, assuming all the E-Sign hoops were jumped through. If they agreed to e-banking and that was all, you cannot now assume this includes eStatements and whatever else you opt to throw in.

As to online statements, because of required disclosures like NSF data, the running online info doesn't act as a substitute for that. They need a statement, e-version or paper, if that is what you were asking.
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#1685749 - 04/04/12 06:10 PM Re: Demonstrable Consent [Re: JBanker28]
Soccer Offline
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Thank you Andy
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#1685779 - 04/04/12 06:42 PM Re: Demonstrable Consent [Re: JBanker28]
Andy_Z Offline
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There could be additional particulars to review as well. As an example if a consumer agreed to eStatements 9 months ago and only now you want to start using that, I'd refresh my agreement with the consumer.

This upcoming webinar may be of interest to you.

http://calendar.bollearningconnect.com/main.php?view=event&eventid=1331297978025
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#1685800 - 04/04/12 07:12 PM Re: Demonstrable Consent [Re: JBanker28]
Richard Insley Online
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Originally Posted By: Soccer
I am now being told(Dep Ops) that the customer's consent when they first sign up for internet banking

If you were not involved in the internet banking implementation and have no first hand knowledge of discussions and decisions relating to ESIGN, you're in a good position to do a dry run of a defense.

Let's say you're in court or dealing with a critical regulator. The other side maintains that your bank did not provide all the necessary preconsent disclosures and did not put the customer through an appropriate test drive--in other words you failed your ESIGN obligations and therefore you have no legal right to substitute electrons for paper. Since you didn't send paper statements and your electrons don't count as "written", then you have failed to provide all of the periodic disclosures required by Reg. E and other applicable regs.

Your bank maintains that your ESIGN disclosures were complete and the consent/test-drive was perfect. Can you prove it?
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#1686010 - 04/05/12 01:42 PM Re: Demonstrable Consent [Re: JBanker28]
John Burnett Offline
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I am thoroughly convinced that the critical nature of the "test drive" and "demonstrable consent" won't be understood until there's a huge blow-up, well publicized, when a major bank or creditor is found by a court to have failed the "demonstrable consent" requirement and ends up the loser in a class action for non-disclosure under Reg E or Reg Z or some other regulation that has significant civil penalties attached to it.
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#1686046 - 04/05/12 02:32 PM Re: Demonstrable Consent [Re: JBanker28]
Richard Insley Online
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Yes, John, I've said the same thing day after day for 12 years. The regulators haven't worried much about it, so bankers don't feel the heat. When a court finally rules on an e-delivery case, it's going to hit the fan.

The case will be very simple-
Plaintiff: Your honor, defendant did not provide my client with the written periodic disclosures required by [insert your favorite consumer-protection law] for the past 12 years. That adds up to 144 separate violations of [insert your favorite consumer-protection law.] My client was irreparably harmed and is here to claim damages and the civil penalties provided by [insert your favorite consumer-protection law.]

Defense: Your honor, my client provided all of the aforementioned disclosures by [insert your favorite push or pull e-delivery method.]

Court: [insert your favorite consumer-protection law] required defendant to maintain evidence of compliance with [insert your favorite consumer-protection law.] May I see this evidence...including evidence of plaintiff's consent to the use of electronic documents--given in the manner prescribed by the ESIGN Act?

Defense: Errr, ahhh, errr, ahhh........

Court: Finding that defendant chose to provide the disclosures required by [insert your favorite consumer-protection law] in electronic form but did not comply fully with the provisions of ESIGN, I find in favor of the plaintiff and direct defendant to pay award actual damages, punitive damages, and court costs.
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#1738690 - 09/06/12 09:24 PM Re: Demonstrable Consent [Re: Richard Insley]
EmilyAnn Offline
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Grrr...e-statement vendors STILL don't understand demonstrable consent. Heard from one today, and when I asked questions about the specific process and how it is ESIGN compliant, I got this response (which I've heard before - it made me mad then, and makes me mad now): "Well, we have hundreds of banks using this system, and no one has ever questioned us on this before."

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#1738704 - 09/06/12 09:56 PM Re: Demonstrable Consent [Re: JBanker28]
Richard Insley Online
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They don't understand it because they don't want the extra cost and complexity necessary to design a meaningful test drive.

ESIGN's legislative history explains how we got here. As the bills advanced through Congress early in 2000, consumerists demanded 100% confirmation of receipt of electronic documents. Without some type of electronic confirmation of receipt, they argued, there could be no guarantee that a consumer actually received a usable document. Businesses argued that this was impractical and prohibitively expensive. The compromise that allowed ESIGN to be enacted was the "test drive." In essence, Congress agreed with the consumerists' demand for electronic receipts, but limited the number of times this is necessary--from 100% of the time to only 1 time: the test drive.
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#1738713 - 09/06/12 10:15 PM Re: Demonstrable Consent [Re: JBanker28]
Andy_Z Offline
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At some point "--it" will hit the fan and there will be 3 categories of banks that I see now:
1. that is why we didn't adopt bleeding edge technology
2. we are not alone, there are hundreds of banks in this with us
3. we are glad we established a compliant system that is recognized as having followed the rules, CIP'd, retained documents, had controls in place, have documentary evidence acceptable to a court, etc...
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#1738758 - 09/07/12 12:21 PM Re: Demonstrable Consent [Re: JBanker28]
rlcarey Offline
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And if you are in the #2 category (pun intended) you can expect three things, a citation for a violation of E-sign in your examinations, the potential ramifications and penalties associated with the failure to deliver any "written" disclosures that you thought you had delivered through your system, and a ciation for the lack of vendor oversight.
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#1738779 - 09/07/12 01:04 PM Re: Demonstrable Consent [Re: JBanker28]
Bob The Banker Offline
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Richard, John, Andy, I understand the explained interpretation that you must have this lock-tite test for domonstrable consent and have heard many times that this will no doubt make you compliant... however, the E-Sign Act only states that the consumer:

(ii) 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 information that is the subject of the consent;
and

Is there any legal precidence that defines the above "reasonably demonstrates that the consumer can access information in the electronic form that will be used"? When I asked for cases, one of our attorneys told me that there are none.

What legal precidence, regulator opinion, etc. made you arrive at your conclusion that the only way to be compliant is to have the lock-tite test drive described above? and that simply providing the consent disclosure in the same electronic form the consumer would receive the disclosure documents is not sufficient?

I would like to be able to document the stance taken for E-Sign.

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#1738931 - 09/07/12 03:41 PM Re: Demonstrable Consent [Re: JBanker28]
John Burnett Offline
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I am not aware of any precedent-establishing case that has considered the question of what will and will not meet the standard set by "in a manner than reasonable demonstrates that the consumer can access information in the electronic form ...." It is not a matter for regulatory opinion, since the law itself prohibits the issuance of regulations to interpret it.

When there is no court case interpreting what will satisfy the wording of the clause, I believe that the party charged with compliance (the bank) has to make at least a best effort, and understand that missing the mark can result in having the court rule that written disclosures weren't made. When later there is testimony in court that banks all around you can and do complete the "E-SIGN dance" as we've tried to describe it here, it's going to be hard to argue that not completing those steps will meet the test.

Arguably, that's a much bigger risk if you're looking at all the disclosures involved in a 30-year residential mortgage loan than it is if the concern is one bank statement involving a $1,500 unauthorized EFT.
Last edited by John Burnett; 09/07/12 03:44 PM.
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#1738956 - 09/07/12 04:09 PM Re: Demonstrable Consent [Re: JBanker28]
Andy_Z Offline
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There are no cases that I know of on this point. But I also have heard time and again of the bank that has a customer consent at the new accounts desk. There is no computer involved, or it was the banks. Does that meet anyone's test? Not mine. And which bank wants to volunteer and potentially be the poster child here? When the customer says "I signed what they told me to" that isn't a great defense, but I don't see the bank winning that argument. When a commercial account suffers a loss under 4A, the case can hinge on what the judge believes was "reasonable security."

The risks are huge because it hasn't been challenged, there isn't guidance, and if this was a moon shot and we were off by 2 degrees at takeoff in 20XX, by 2012 there could be such a large group that the class action suit clearly shows we'll never hit the moon on this path.
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#1739024 - 09/07/12 05:15 PM Re: Demonstrable Consent [Re: JBanker28]
Kathleen O. Blanchard Offline

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And it all revolves are "reasonably demonstrates" ....without a simulation, how do you do that!
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#1739096 - 09/07/12 06:44 PM Re: Demonstrable Consent [Re: Kathleen O. Blanchard]
Bob The Banker Offline
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Originally Posted By: Kathleen B
And it all revolves are "reasonably demonstrates" ....without a simulation, how do you do that!

Many would argue that a consumer reading and agreeing to a disclosure in the same exact format that would be used in the future, would reasonably demonstrate they could read that format.

I'll need to digest this thread and take a look back at my files.

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