If this needs to be moved to a different forum, please move.

E-Sign Act is primarily consumer driven, but that doesn't give commercial loan officers to have "free will" to be emailing documents and other disclosures through email correct? In order to provide disclosures and appraisals through email, there is no distinction between consumer or commercial right? That seems to be what would make sense.

You're looking at this the wrong way. Focus on risk. ESIGN poses no risk because it is optional and entirely permissive. The actual risk comes from the OTHER laws and regulations that require you to deliver documents, disclose certain information, deliver copies of appraisals, etc. In the case you describe, those "other laws/regs" include Regs. B and Z, and RESPA. In order to determine if your bank is at risk of civil and criminal penalties and liability, you must determine 1) what these "other laws/regs" require, and 2) whether you have done it.

What constitutes a "commercial loan officer" can vary, but to simplify this analysis, let's say that these bank employees handle nothing but the banking needs of business organizations (down to and including sole proprietorships and DBAs.) As you know, federal banking laws/regs have very little control over commercial transactions and services. There can be risk of legal penalties when there is coverage, but not when the transactions, services, and relationships are exempt from the "other law/reg" in question.

Must your current practices be changed in order to avoid penalties? To answer that question, you must first catalog the types of documents, disclosures, appraisals, and other items that are being emailed. Next, you must determine which (if any) of the items on your list are covered by one or more of the "other laws/regs." (If none are covered, there can be no penalty risk and your current practices require no change.) Next, you must determine that any covered item is being handled in full compliance with the "other law/reg" that required the item. This is where ESIGN can become an issue.

When an "other law/reg" requires you to deliver something (such as a document, disclosure, or appraisal) "in writing," you have two choices. Delivery on paper always counts. Delivery in electronic form can count, but only if you obtain the customer's consent in the ESIGN-prescribed manner. When you are dealing with consumers, the prescribed manner is very specific--but when you are dealing with non-consumers, ESIGN is silent.

The entire purpose of getting your customer's ESIGN-enabled consent is to satisfy the part of the Reg. B, Reg. Z, or RESPA requirement that a document or disclosure delivery must be "in writing." If your commercial loan officers are not trying to email "covered" items, then there's no blood & no foul!

Thanks for that help. I know appraisals are going out from commercial loan officers but not really sure about anything else right now.

Cybersecurity is HUGE right now and on the examiners "risk" watch list. The government has many contractors and typically requires e-communications but these are agreed upon and established channels. I'm not sure this is the case here. This could be a dangerous relationship.

Regarding the E-SIGN Act and the Reg. B Appraisal Delivery Requirements: What do the regulations say about a loan made to an individual or sole proprietorship for business purpose secured by a 1st on residential property? Does the E-SIGN Act provide guidance regarding the delivery of that appraisal since it is technically for business purpose? Should the delivery of the appraisal in these circumstances fall under the E-SIGN Act provisions?

ESIGN does only two things:
1. legalizes electronic signatures (without defining what is or is not an electronic signature), and
2. makes electronic documents the legal equivalent of paper (without concern to the content of the document.)

The content of documents (electronic or otherwise) is subject only to the requirements of the laws & regs that relate to your products--such as Reg. B. Reg B is where you must look for answers to your questions.

The regulation requires that any e-delivery of the appraisal copies be "subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act)." If your borrower is a consumer, you'd have to step through he E-SIGN dance and obtain demonstrable consent before providing the copies electronically rather than on paper. If the borrower to whom you owe the copies is not a consumer, E-SIGN only requires that you have the borrower's agreement, which doesn't have to be in any particular form or preceded by the preliminary steps of the E-SIGN dance.

E-SIGN says a consumer is "an individual who obtains, through a transaction, products or services which are used primarily for personal, family, or household purposes, and also means the legal representative of such an individual."

E-delivery of the copies would appear to be acceptable for a business-purpose loan, if you have simple consent from the borrower.

John,
Pertaining to business purpose loan

We are planning to add a section on our commercial applications for "consent to receive documents electronically" We want to add it on it's own separate page with the application. This would cover us for that particular loan.

We would like to be able to scan the consent in the customer's electronic credit folder (rather than the particular loan) and use it for all future loans.

For example, use this wording - "By initialing here, you agree to receive documents for this transaction and all future transactions electronically." Would this be acceptable?

You are free to enter into any type of e-delivery arrangement customers will accept, and unless you are dealing with consumers, a simple agreement is all you need. Since the courts are still getting used to electronic documents, it's a very good idea to discuss plans with counsel before getting locked into a business decision. Let risk-avoidance be your guide.

Richard,
Thank you for your response. This is very helpful.