The Electronic Signatures in Global and National Commerce Act (E-Sign Act), passed in 2000, greatly enhanced the ability of companies to conduct transactions electronically by ensuring the validity of contracts that were entered into electronically. Congress, in its drafting of the E-Sign Act, was careful to balance the interests of businesses and consumers. The E-Sign Act neither requires businesses nor consumers to receive or accept electronic contracts or disclosures; however, using online or other electronic methods to contract with and disclose important information to consumers is a benefit for both parties.
Despite the E-Sign Act being in place for over a decade, companies often are unaware of the full requirements that must be complied with prior to sending electronic disclosures to consumers.
No Requirement to Receive Electronic Disclosures
The E-Sign Act does not require consumers to accept the delivery of electronic disclosures. Consumers may elect to continue to receive paper disclosures from companies they do business with. Similarly, companies are not required to accept electronic disclosures from consumers.
Required Disclosures to Consumers Prior to Consent
The E-Sign Act requires that businesses make certain disclosures to consumers prior to receiving their consent to receive electronic disclosures. Companies must disclose the following information clearly and conspicuously to consumers:
- The right to receive the document in a nonelectronic form, the right to withdraw the consent to receive documents electronically, and any consequences that may occur as a result of withdrawing the consent to receive electronic documents;
- Whether the consent to receive electronic documents applies only to a particular transaction or to specified categories of documents that may be provided going forward;
- The procedures for withdrawing consent to receive electronic disclosures and to update their contact information;
- The procedures for obtaining a paper copy of an electronically provided document and the fee, if any, for doing so; and
- The hardware and software requirements for access to and retention of the electronic records to the consumer.
Consent to Receive Disclosures
The E-Sign Act imposes requirements on companies that wish to use electronic records or signatures in consumer transactions. If a company wishes to provide consumers with electronic notices and disclosures, the company must receive the consumer’s affirmative consent to receive the information electronically.
A consumer’s consent is valid only if the consumer consents electronically or confirms the consent electronically in a manner that demonstrates that the consumer can access information in the electronic form. This requirement ensures that the consumer has access to the Internet, a computer, and the software necessary to review the electronic disclosures.
There are many ways a company can receive a consumer’s consent; however, two of the most common are:
- Including a page that is displayed to consumers after signing in to an online account. Companies will often include a page that contains a copy of the electronic disclosure statement and asks them to review the disclosures and select “Agree.”
Changes in Hardware and Software Requirements After Consent
The E-Sign Act also ensures that consumers who have agreed to receive electronic disclosures are not disadvantaged by a company’s change in hardware or software requirements. If a company makes a change to its hardware or software, then the company must provide consumers with an update description of the hardware and software that is not required to access and retain the electronic disclosures. A company must also remind consumers of their right to withdraw their consent. After informing consumers of the new requirements, a company must once again obtain the consent required by the E-Sign Act.