Just looking to bounce some ideas.

We have customers sign consumer loan documents on electronic signature pads (while viewing them on a computer screen) at closing and then print and give a copy of the signed documents to the customer. Because of Reg Z, a paper disclosure is presented before closing.

Based on the below Staff Interpretation, it is permissible to give the disclosure to the customer after they have signed it (when they are combined with a credit contract), but this is clearly talking about signing of paper documents. Do you think this could be applied to electronically signed documents as well? The biggest issues I see are that the document on the computer screen is not "in a form a consumer can keep," and ESIGN.

Any thoughts are appreciated!

Supplement I
Section 1026.17—General Disclosure Requirements
17(b) Time of Disclosures
3. Disclosures provided on credit contracts. Creditors must give the required disclosures to the consumer in writing, in a form that the consumer may keep, before consummation of the transaction. See § 226.17(a)(1) and (b). Sometimes the disclosures are placed on the same document with the credit contract. Creditors are not required to give the consumer two separate copies of the document before consummation, one for the consumer to keep and a second copy for the consumer to execute. The disclosure requirement is satisfied if the creditor gives a copy of the document containing the unexecuted credit contract and disclosures to the consumer to read and sign; and the consumer receives a copy to keep at the time the consumer becomes obligated. It is not sufficient for the creditor merely to show the consumer the document containing the disclosures before the consumer signs and becomes obligated. The consumer must be free to take possession of and review the document in its entirety before signing.

i. Example. To illustrate:
A. A creditor gives a consumer a multiple-copy form containing a credit agreement and TILA disclosures. The consumer reviews and signs the form and returns it to the creditor, who separates the copies and gives one copy to the consumer to keep. The creditor has satisfied the disclosure requirement.

With minor adjustments, I don't see why you can't bump this process up to an ESIGN-compliant delivery method that satisfies the "in writing" part of the Section 1026.17(a)(1) delivery standard. The "in a form that the consumer may keep" part of that standard is a leap of faith, but if you step way back, the process meets the spirit of Reg. Z.

An electronic signature can be anything you and the borrower agree. ESIGN provides a blanket blessing.

As far as document e-delivery goes, when you go through ESIGN's pre-consent disclosures (which don't have to be in writing), you probably cover most points when your employees explain the computer/keypad process. If you haven't touched on a point or two, addition should be easy. Demonstrable consent is usually handled at the consumer's remote location, but not in this model. Here, you and the borrower can establish by face-to-face conversation that s/he is able to view the computer screen and comprehend it's content. The e-signature can be your evidence that prior to beginning the display/review/sign/print process, the consumer "affirmatively consented" to e-delivery of the time-of-consummation TIL disclosures and acknowledged that a printed paper copy (at no additional cost) would be provided at the conclusion of the transaction.

Thanks for your reply Richard. I guess I was thinking along the same lines but was just having a tough time finding a way to meet the "in the form the consumer may keep" part. I agree that the spirit of Reg Z would still be met.

Is there any room with "consummation"? The definition reads that "Consummation means the time that a consumer becomes contractually obligated on a credit transaction." - are they interpreting it to mean signing of documents or could this be disbursement of funds? Arguably, if a person signs all the documents and changes their mind right after, we would not make them take the loan and thus become "obligated."

"Consummation" is whatever state law says it is, but it's hard to imagine consummation being later than the time the consumer signs the promissory note.

Just playing devil's advocate: what is the consumer contractually obligated to do, if we have not given them any money yet?

But I get your point, this is just splitting hairs.

Most likely, your note is worded along the lines: "for value received, I hereby promise to pay...." As the proponent of this contract, you have implied that the funds (the "value" given/received) will become the borrower's property at the moment of consummation. Simultaneously, the applicant becomes a borrower, has the contractual right to demand disbursement of the funds, and is bound to repayment and all other obligations of the contract.

True. Thanks Richard!