E-Sign and Electronically Sending Legally Required Documents

This article previously appeared on the Ontario Systems Blog and is republished here with permission (and with additional information from insideARM at the bottom).

As consumers continue to move away from paper and spend more time sending documents and payments electronically, ARM companies need to step up and keep compliant with the regulations that protect convenience. We’ve covered electronic payments at length – now it’s time to master E-Sign. But what about digital communication?

The Electronic Signatures in Global and National Commerce Act (E-Sign) provides parties with the ability to substitute electronic records for paper and use electronic signatures in place of wet signatures to sign electronic records. It is also the law Congress passed to make clear digital documents and digital signatures have the same force and effect as paper and pen.

But E-Sign also contains an often-overlooked section that addresses when and how one may substitute the digital delivery of a legally required consumer disclosure in place of traditional delivery methods, such as hand delivery, certified mail, or the U.S. postal service. Creditors, governmental bodies, healthcare providers, and third-party debt collectors alike need to embrace the consumer disclosure requirements of E-Sign if they want to save on postage expenses and satisfy the growing needs of consumers to manage their business using electronic communication methods. To learn more about the Bureau of Consumer Financial Protection's position on E-Sign and how it impacts third-party debt collectors, read the decision Lavallee v. Med 1. 

Editor's Note: insideARM previously published an article about the Lavallee decision.

In short, subparagraph c) of the E-Sign Act provides: if a statute, regulation, or other rule of law requires information relating to a transaction or transactions to be provided or made available to a consumer in writing, then the use of an electronic record may be substituted for its paper counterpart if the consumer is first provided with a clear and conspicuous notice informing him or her of the following:

• The consumer’s right to receive the information in paper form at any time upon request;
• Whether the consumer’s consent to receive electronic records applies to one or more transactions; The consumer’s right to withdraw consent at any time;
• A description of the procedures the consumer may follow to withdraw consent and the consequences of withdrawing consent such as the imposition of fees or the termination of the relationship;
• Process the consumer may use to update their contact information;
• Explanation of the hardware/software requirements for accessing and retaining records
• Process to obtain paper disclosures even after consent to receive electronic records has been given
• The consumer’s need to consent electronically, or electronically confirm consent, in a manner that reasonably demonstrates their ability to receive or access the information electronically

I have seen paragraph c) E-Sign disclosures presented in as many as three pages filled with legalese or succinctly presented in a pop up box on a debt collection website. But the length and complexity of the consent disclosure information is far less important than your need to simply address each point in your disclosure method and to provide this information to the consumer before they consent to receive their legal disclosures and documents electronically.

If you are contemplating the use of text messaging or email to provide consumers with legally required disclosures, such as the FDCPA’s validation notice or postdated payment notice or Reg E’s authorization for preauthorized electronic funds transfers,  or any other document or disclosure legally required to be provided in writing advise your team to embrace E-Sign and use it to your advantage. It may save you the cost of many hundreds of thousands first-class mail stamps.

To date there has been very little litigation over the impact of E-Sign on written disclosure requirements related to debt collection. The Lavallee case is one of the first. To bring closure to this issue, members of the industry have opened a dialogue with the BCFP to determine when E -Sign may apply and whether an exemption from E-Sign would benefit consumer and debt collector alike.

insideARM Perspective

There are many reasons why debt collectors look to electronic methods of communication with consumers. First and foremost, it is the preferred method of communication by many consumers, especially younger generations. Additionally, to counter-balance the increase in the cost of compliance due to the ever-changing laws and regulations that govern the industry, debt collectors are looking at other cost-saving methods. While a single stamp may not cost that much, the volume of letters that debt collectors are required by law or regulation to send makes the cost of mailing letters significant. The ability to use modern methods of communication can alleviate that cost burden.