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The Need to Protect Consumers – Especially Low-Income Consumers – from UETA

The Need to Protect Consumers — Especially Low-Income Consumers — from UETA

Many states are currently considering passage of a uniform bill called the Uniform Electronic Transactions Act (“UETA”), which will have a significant impact on all consumer transactions in your state after its passage. It governs the exchange of information and signature requirements for transactions conducted both electronically (computer to computer) as well as transactions conducted in person.
Congress passed the Federal Electronic Signatures in Global and National Commerce Act (1) (“E-Sign”) in June 2000. This law provides that electronic signatures and electronic records generally satisfy legal requirements for signatures or writings. E-Sign authorizes the substitution of electronic notices for paper notices including most, but not all, types of consumer notices. E-Sign also includes a number of important protections to ensure that consumers can receive, keep and use electronic notices provided to them. Unfortunately, states may eliminate the federal consumer protections of E-Sign by enacting UETA. Unlike most federal statutes, E-Sign permits a state to displace it.
UETA is a proposed Uniform Law on the same subject matter as E-Sign , but it is being pushed hard by the National Conference of Commissioners on Uniform State Laws (“NCCUSL”).
The Problem:
Despite the passage of the federal E-Sign law, most states want to pass UETA, so that state law will govern transactions in their state. However, without some amendments, passage of UETA will not protect consumers as well as the federal E-Sign will.
E-Sign and UETA are similar in many respects, but they are not at all similar in the way they treat consumers. In consumer transactions, E-Sign requires a specific and electronic consent process before an electronic notice may replace a legally required written notice. UETA merely requires that the parties agree to conduct transactions by electronic means, but does not specify how that agreement is to be proven. Instead, UETA states that agreement is determined from the context and circumstances. UETA’s agreement requirement applies to all types of electronic notices (legal and contractual). UETA undercuts its own basic premise of agreement by permitting the agreement to conduct transactions electronically to be found from the context, including conduct. UETA also permits the agreement for future electronic notices to be given only on paper. UETA does not exempt any categories of consumer notices.
(1) The need for consumer protection: Electronic records, however, present special problems in a consumer context. Unlike mail, which all consumers have for free, over two thirds of the households in the U.S. still are not connected to the Internet. Yet, under UETA consumers in face-to-face transactions could be asked to sign paper documents agreeing to receive all documents relating to the transaction — both currently and in the future — on-line. This could be construed to be legal even if the consumer does not have ready access to a computer.
There are considerable problems even for consumers who have computers. Consumers commonly receive mail every day, many people do not check email on a regular basis. Unlike mail, where filing a forwarding address with the post office is easy, there is no system for forwarding email when a consumer switches internet providers. Unlike mail, where everyone has a residence address somewhere, many consumers discontinue email accounts entirely. Unlike mail, which can be opened by
opening an envelope, email sometimes comes with attachments which the consumer’s computer cannot read (and, indeed, we are sometimes warned not to open unfamiliar attachments because of the risk of viruses). All of these factors counsel that we exercise caution in limiting consumer rights based on the assumption that consumers have received everything that has been emailed to them.
(2) The uniform version of UETA should NOT be adopted: The “straight” uniform act, was written before the adoption of the Electronic Signatures in Global and National Commerce Act (known as “E-Sign”), Section 101 of which contains a number of important consumer protections. The uniform bill does not contain those provisions; and the failure to include them arguably results in E-Sign’s consumer protections being preempted. The absence of these provisions makes UETA very dangerous to all consumers in your state.
(3) The state can pass UETA without displacing the consumer protections in the federal E-Sign. The state legislation should specifically state that its uniform version of UETA, does not displace the consumer protection provisions in E-Sign still apply. Additionally, the state should pass a companion bill with additional consumer protections, as contemplated by Congress.
(4) The additional consumer protections in the companion bill are straightforward and fair. The first two changes below are especially important. Specific statutory language is available.
Exempt from UETA the notices exempt from E-Sign. These are key notices such as foreclosure, eviction, cancellation of life and health insurance, utility shutoff, and product recall notices.
Defer to the consumer consent requirements of E-Sign section 101(c). This is essential to ensure that consumers actually have the capacity to receive and open electronic notices. Deferral to the federal law is appropriate or repeating those requirements directly in the state law is a better way of accomplishing the same essential protections.
Electronic responses to electronic notices: A consumer should be allowed to reply electronically to an electronic notice. If a notice is given electronically, the commercial party should not be able to require a paper response.
Hand delivery in door-to-door sales: In a door-to-door sale, if the sales materials are hand-delivered, then the consumer should be assured of an actual copy of any contract to which he is agreeing.
Protections against multiple original copies: Unlike a paper document, for which only an actual original copy is entitled to holder-in-due-course status, multiple duplicate originals can easily be created electronically. Additional protections are needed to assure that a consumer cannot be double-billed because of confusion (or fraud) as to which version of a note is the original.
Application of E-Sign to document retention: This addition is necessary to assure that UETA will not be construed as preempting Sections 101(d) and (e) of E-Sign, which deal with the retention of electronic documents.
Place of electronic contracting: It is common that consumer transactions are governed by the law of the in which the consumer is located. For this purpose, it should be made explicit that a consumer contract entered into in your state by the consumer is a contract governed by your state law.
Prohibition on waivers: To the extent that consumer protections are added to UETA waivers of these consumer protections should be prohibited.
Use of opening of notice to measure date of receipt: E-Sign leaves delivery requirements for electronic records to state laws. Because consumers do not necessarily open email daily, notices that trigger time frames should not be deemed effective until the email has been received and opened.
Requirement that notice be received by the consumer in a readable format: Not all email communications (and particularly email attachments) are readable by the recipient’s computer. For the sending or receipt of an email to be effective, there should be a requirement that its format be intelligible to the consumer’s computer.
For a detailed discussion on the interrelationship between UETA and E-Sign, and necessary consumer protections, see http://www.consumerlaw.com.
For further information, contact:
Gail Hillebrand
Staff Attorney
Consumers Union’s West Coast Office
San Francisco
(415) 431-6747
(1) Pub. L No. 106-229, 114 Stat. 464 (2000) (codified as 15 U.S.C. §§ 7001-7006, 7021, 7031) (enacted S. 761). For a full text of the final bill, see the Congressional web site: http://thomas.loc.gov/home/thomas.html and search for S. 761.