September 29, 2000
Consumers Union Offers Tips Before You Sign Your Name on the Digital Line
Beginning October 1, “digital contracts” that consumers agree to online will have the same legal status as pen-and paper contracts. That’s when the federal Electronic Signatures in Global and National Commerce Act, or E-Sign, goes into effect.
The new law will make online contracts for a variety of business transactions, such as purchasing a car, buying an insurance policy, or closing a mortgage, more clearly enforceable. At the same time, it will allow businesses to satisfy their obligation to provide legally required notices to customers by sending those notices electronically, once the consumer provides consent for such online communication. If a consumer wants to revert to paper notices, the new law permits the business to charge a fee, as long as the fee was disclosed when the consumer first consented to electronic notice.
“Read the fine print before you enter into an online contract,” said Gail Hillebrand, Senior Attorney with Consumers Union’s West Coast Regional Office. “As consumers turn to the internet to handle more of their business transactions, they need to be vigilant to avoid unwittingly sacrificing their legal rights in the process.”
Consumers Union urged consumers to make sure they have the right to revert to paper notices without a fee if they don’t like getting information such as credit card statements electronically. Using email for legal notices may also create a special risk for consumers who don’t check their email regularly. The group cautioned consumers to refrain from giving out their email address to businesses unless they plan to check their email regularly and to avoid junk mail filters on their computer that might screen out messages from businesses authorized to send electronic notices. See the attached list for a complete set of consumer tips.
The new law broadly authorizes electronic records and electronic signatures as legally effective. But it does not identify the technology that must be used for an electronic signature. Instead, it defines an electronic signature as an electronic “sound, symbol, or process” attached to a contract or other record which was “executed or adopted by a person with the intent to sign the record.”
The E-Sign law contains some special consumer protections before businesses can send notices required by law to customers by email in place of paper notices. First, the consumer must consent or confirm a prior written consent electronically. The manner of consenting electronically must demonstrate that the consumer will be able to access the future information in the form in which it will be sent. Second, companies that send electronic notices must tell the consumer what hardware and software is needed to read them. Finally, under the federal law, businesses must continue to send paper notices for urgent matters such as utility shut-off, foreclosure, eviction, some loan default notices, and product recalls. This rule is designed to ensure that consumers do not miss critical notices because a computer problem prevented the consumer from receiving or opening the notice.
“While online contracts may be quick and convenient for computer-savvy consumers, we can’t overstate the importance of taking the time to understand all of the details and obligations before you sign on the digital line,” said Frank Torres, Legislative Counsel for Consumers Union’s Washington DC office.
The federal law allows its consumer protections to be displaced by state law if a state enacts the Uniform Electronic Transactions Act (UETA). The federal law contains stronger standards for consent, disclosure, and document tampering than UETA, which some states have already passed. Consumers Union advises any state legislature which adopts the UETA in the future to clearly indicate that it does not intend to displace the federal consumer protections.
Consumers Union, publisher of Consumer Reports, is an independent, nonprofit testing and information organization, serving only the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health, nutrition, and other consumer concerns. Since 1936, our mission has been to test products, inform the public, and protect consumers.
Gail Hillebrand, 415-431-6747
West Coast Office
TIPS FOR CONSUMERS
WHEN USING ELECTRONIC SIGNATURES
TO SIGN ONLINE CONTRACTS