Notification to Customers and e-Statements

Following a core conversion, we discovered an error in some account terms disclosed to customers during a specified time period. For affected customers who have agreed to receive e-statements, are we required to notify them of this "correction to their account document" via electronic notification or could we send notice to them via postal mail?

I am not sure I understand. You mean your account agreements did not include maintaining e-statements is a requirement to maintain this specific account type? If not, then you would have to follow your change of terms procedures. A customer can only sign up for e-statements using a E-Sign compliance process.

No, an account term completed unrelated to e-statements was disclosed incorrectly at account opening. We have corrected the term, and need to notify affect customers of this correction. If customers signed up for e-statements, is that the only method we have to notify them of this correction or could we physically mail them a notice regarding this change through the postal mail?

Not all affected customers have signed up for e-statements, so we are trying to determine the most effective way to notify all of our affected customers with this correction in account terms.

The fact that a customer has provided demonstrable consent to receive notices and disclosures electronically does not mandate that you provide them in that format. The consent provides the option to do so.

If you elect to go the route of a statement message, then all customers receiving statements, either paper or electronic would have the notice on their statements.

If you need to go with a statement insert, then you would need to work with your vendor ensure that insert is included electronically or have a special mailing with that insert to your E-statement customers.

Thank you, Brian. So as long as all affected customers are notified, it doesn't matter what method of notification is used (even if some have previously provided demonstrable consent to receive notices electronically). Correct? Is this stated in the e-sign act or where is this stated?

The method of notification doesn't matter. The language of the E-SIGN Act is all about obtaining customers "consent" to provide disclosures electronically. The fact that you have consent does not mandate that you provide the disclosures electronically.

I can't prove a negative for you. There is nothing in the law that says, "You can provide paper disclosures after obtaining consent." This is intuitive in how the law is written.

If we send them a separate secure mail message regarding this change (apart from their e-statement), could that be considered proper notice?

A few things must fall into place for that to work.

First, review the E-Statement agreement. Does the agreement include notices or is it limited to E-Statements? If you did not obtain consent to send change in terms notices electronically, then this is not an option.

Second, is the notice being sent using the same method and in the same format as the E-Statements for which the customer provided demonstrable consent? If E-Statements are in a .pdf format and your secure email is in an HTML format, this wont work because the customer hasn't demonstrated that they can view a different format. If the format and sending method is them same, then it is ok.

Our consent covers "electronic documents" which may include, but are not limited to, agreements, disclosures, notices and statements.

Based on the set-up of our online platform, this "notice" addressing the corrected account term would also be located in a different place than customers go to receive their monthly e-statement. Currently, e-statements are located under Transactions > Statements, while Messages (which is what the separate secure email would be) is a separate stand-alone option. Does that factor into this at all?

Step away from your automation for a moment and look at the regulation. I may have missed it, but did you tell us the type of product (credit vs. deposit)? Assuming it's a deposit product, then which requirement of which regulation are we talking about? The reason for getting to the right end of the horse, of course, is to see exactly what you were required to disclose, and when, and how. Most importantly -- what was the general delivery requirement for the item that was disclosed incorrectly (or not at all?)

Assuming the item in question had to be disclosed "in writing," then (as Brian advises) you have to review the document(s) that make up your service agreement for e-delivery, and your ESIGN consent. Two parts of the agreement/consent document(s) must guide the corrective action that needs to be taken now.

First, does the service agreement say that you "must" use e-delivery, or (hopefully) that "it's acceptable" to use e-delivery. Unless you discover "must" language, then you and the customer have left the door open for "written delivery" to include either paper or electrons.

Second, you've already told us that your ESIGN consent language is intentionally broad. Since the item in question is a "disclosure", then I'd say you already have consent to send an amended disclosure by the means covered in your agreement/consent.

If the reg & your agreement/consent allow (or require) you to deliver the disclosure correction electronically, but you can't make the e-delivery in exactly the same manner you originally agreed (Brian mentions .pdf vs. html, for example), then Section 7001(c)(1)(D) of ESIGN comes into play. It says: "after the consent...if a change in the hardware or software requirements needed to access or retain electronic records creates a material risk that the consumer will not be able to access or retain a subsequent electronic record that was the subject of the consent, the person providing the electronic record [repeats the standard ESIGN consent exercise referencing the technology that has changed.]"

What is "a material risk that the consumer will not be able to access...."? That's a judgement call you have to make. Today's consumer hardware and browsers are more robust, and modern consumers are much more tech-savvy than they were in 2000 when ESIGN was enacted.