Does anyone accept Home Equity Applications online? If so, how do you handle the pre-application disclosure requirements under Reg.Z? Are you using the E-Sign Act? It appears to me that Reg. Z does not allow the same three day period to mail the pre-application disclosures for electronic applications as it does mail or telephone applications: in fact, the Reg. is silent on electronic disclosures with few limited exceptions. Help please!
Leslie

I don't know that many or any banks are using e-sign on consumer transactions as a practice yet. But many disclosures that are required up front, especially ARM samples, are in the form of click-throughs. You have to read (yea-right) the disclosure and go to the bottom where you click and agree that you have read the disclosures required. This should be the only way to get to the application...at least the first time. If your application URL can be bookmarked, I'd recommend putting another confirmation and a link back to the disclosure on the app itself. I believe the click-throughs will be an accepted form of disclosure in many cases. If you need an actual signature, then e-sign would be an alternative. We don't do HI apps online at my banks.

Also, remember if you do have an application online, COPPA rules can apply. I recently added "Must be 18 or older to apply" on all mine.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

[This message has been edited by Andy Z (edited 01-18-2001).]

We accept both equity and mortgage applications online, and as Andy says, the applicant must "confirm" that they have read or downloaded the up front disclosures before the process can be completed. E-sign allows them electronically if agreed to up front. We still get the loan documents signed on paper.

Please review and critique the applications. I need more eyes than I have been allocated. Please put your first and last name all together as the first name and "test" as the last name so we will not chase you because you bailed out on us. As long as you don't give a credit card number on the last screen, you can abort the application without us pulling a credit report.

Apply at http://www.fremontbank.com

PLEASE send me feedback at Al.Miller@fremontbank.com

Thanks in advance.

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Al Miller, CRCM
Fremont Bank (CA)
(510) 790-5825
(510) 505-5211 FAX

Opinions expressed are my own and not necessarily shared by my employer.

Simple "click-throughs" are not enough to satisfy ESIGN's conditions for giving electronic disclosures. In order to be treated as "written" (a requirement of most disclosure rules), the disclosure must be on paper (if applicable timing rules allow) or in electronic form--following ESIGN's disclosure and opt-in scheme.

Just ahead of the first "click through" is the following:

By continuing with this online application process, you agree that the disclosures required to be provided at the time of application will be provided electronically. You must have the ability to save the disclosures to disk or to print the disclosures for your records. If you do not want to receive the disclosures electronically, or if want paper copies of the disclosures, please call us at 1-800-659-7334 and we can take the application by phone and mail you the disclosures. There may be an application fee due at time of application. This fee may only be paid by debit or credit card. If you want to pay be check, you must apply by phone or through a branch.

Any opinions?

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Al Miller, CRCM
Fremont Bank (CA)
(510) 790-5825
(510) 505-5211 FAX

Opinions expressed are my own and not necessarily shared by my employer.

Al- My problem with simple click-throughs is Section 101(C)(1)(c)(ii) of ESIGN which creates an unusual duty to confirm that the consumer got and could use the information you are trying to transmit (the HELOC disclosures):

"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..."

Does a simple click-through demonstrate to you that the consumer can actually read the required information? (I'm reading "access the information" to mean both 'finding' and 'using' the information.)

How would you respond if the consumer later alleged something like "I didn't see any disclosures, just the button to continue..."? Obviously, the risk level is lower for boilerplate notices and booklets than for "live" data like the periodic statement, for example.

Two of the "Big Guys" out there are accepting home equity line applications online: BofA and Wells.

Just because the big boys do it, doesn't make it right.

I'm not saying they are wrong mind you, but I have seen errors on major lenders Web sites.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

Don't misunderstand ESIGN's coverage--there's no single "right way" to handle the disclosure and opt-in. Until the courts get a few cases challenging electronic contracts, signatures or disclosures, we have no guidance beyond the general language of the Act. In the meantime, banks will adopt differing levels of risk tolerance and you'll see lots of different opt-in implementations. The only one that is clearly wrong is a total failure to provide ESIGN disclosure and opt-in prior to delivering disclosures that must be "written."

Each player must determine what "... in a manner that reasonably demonstrates that the consumer can access information in the electronic form...." means, and how much proof of success the bank wants. For simple disclosures like the booklet and program disclosures for HELOCs and ARMs, a lender won't want the same level of assurance as will be needed when transmitting disclosures subject to civil penalties (transaction-specific loan disclosures or HELOC periodic statements, for example).

Andy is absolutely right. I did not mean to imply that they are, or are not doing it correctly. I was only pointing out that they do it--in response to the original question.