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Recipe for Fertile Soil

With President Clinton's blessing of new legislation, the option of signing documents electronically over the Internet is now legally valid. Over the summer Congress passed and the President signed (on paper) a new bill that gives legal weight to digital signatures. What does that mean to consumers? It takes the convenience of online shopping one step further, and allows you to seal the deal for home insurance, a new car or a home mortgage loan right from your computer. And it gives e-commerce, expected to triple over the next three years to some $1.6 trillion a year, another boost by giving electronic signatures the same legal status as a paper document.

The legislation, S.761 sponsored by Senator Spence Abraham of Michigan was designed to encourage paperless contracts and encourage consumer contracts over the Internet in states that don't currently allow this important service. Digital signatures, or encryption, fingerprint readers and stylus pads that recognize your identity in cyberspace, have not been accepted as legally binding in all states and the new law provides a uniform federal rule allowing such technology.

Congress had to iron out consumer concerns with the bill, including fears that banks, insurance companies and the like could use electronic notification to escape consumer notification laws. Those laws require postal letter delivery for important notifications such as rate increases, policy cancellations, or product recalls. For example, what if your insurance policy were suddenly canceled or changed, and your computer or Internet Service Provider was down when the company sent you the e-mail? Imagine your surprise when you call your insurance company to make a claim, and hear: "Sorry, you should have checked our web site."

Fortunately, Congress found a way to remove roadblocks to e-commerce and still keep the safeguards that protect consumers. "This legislation will eliminate the single most significant vulnerability of electronic commerce, which is the fear that everything it revolves around . . . could be rendered invalid solely by virtue of their being in electronic form," said Senator Abraham. Under the final bill, you don't have to accept electronic notification. Consumers must "opt in" to electronic signature agreements and must consent to receiving records and documents electronically rather than with paper. Notices of termination, such as health insurance lapses, electricity cutoffs or evictions, would still have to be delivered by paper.

Sources used to create this article include Jim Abrams and The Associated Press.

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