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