I've been asked to look at DocuSign compliance from both an electronic signature standpoint and an ESIGN compliance standpoint. We buy loans from a company that originates loans all over the country using Docusign. To our knowledge, we've only received loans that have used non-electronic signatures and have not been subject to ESIGN previously.

I've asked this company if they can tell me if all states have adopted UETA authorizing electronic signatures, and how they document demonstrable consent for ESIGN. I've been pointed to a DocuSign webpage that says "most" states have adopted UETA. That doesn't make me extremely comfortable. Does anyone know of any states that haven't adopted UETA? Am I wrong that we shouldn't accept

In regards to the demonstrable consent for ESIGN, it appears that DocuSign's consent looks like this:

Please read the Electronic Records and Signature Disclosure. (The underlined part is a link to the disclosure.)

I agree to use electronic records and signatures. (there is a check box in front of this statement)

That doesn't look like it meets the demonstrable consent threshold. Am I missing something?

This doesn't really answer your question, but another vendor has this on their webpage.


https://rightsignature.com/legality/ueta-act

Regarding acceptance by states, UETA has been adopted in 47 states. The other three, Washington, Illinois, and New York, have codified provisions within their state laws functionally similar to UETA.

In New York the Electronic Signatures and Records Act (State Technology Law, Article 3) is the applicable law. ESRA authorizes regulations to help implementation. Title 9 NYCRR Part 540 is the regulation.

In Washington it is the Washington Electronic Authentication Act Chapter 19.34 RCW.

Illinois: Electronic Commerce Security Act, 5 ILCS 175.

You might want to ask the company originating the loans to provide information regarding their (or their vendor's) compliance with applicable laws on that subject, including the federal E-Sign Act (Electronic Signatures in Global and National Commerce Act, 15 USC 96). Vendors providing e-sign technology should expect to get those kinds of inquiries routinely and should have detailed complaince information available.

You don't need UETAs to get electronic signatures. Section 7001(a) of ESIGN applies universally and gives you the same legal coverage. In both cases, you don't have to do anything. These laws simply say e-signatures are the legal equivalent of wet signatures. "Compliance" is a non-issue--your real concern is the risk of repudiation. As you evaluate this or any other vendor's products, keep asking yourself (and the vendor) what will happen after the vendor is out of the picture and these borrowers refuse to acknowledge that the electronic "X" on your electronic promissory note is, in fact, their electronic "X"s. What evidence will it take to persuade a court that the borrower is lying and that the signature is valid?

UETAs are state laws, not federal. Accordingly, they provide the legal cover you need for contract documents. Up to this point, your primary concern remains the risk of loss. When the contracts involve consumers, however, you plunge into an assortment of federal requirements (TILA & RESPA, for example) The delivery of e-documents becomes a legal/regulatory issue when the payload of the e-document is a federal consumer protection disclosure of some kind (ex- RESPA, Reg Z) and you have a legal obligation to provide that disclosure "in writing." Paper, of course, always satisfies the "in writing" requirement. E-documents can also satisfy an "in writing" requirement, but ONLY when you have met the standards of Section 7001(c) of ESIGN.

This section of ESIGN has three parts: preconsent disclosures, consent, and test drive.

ESIGN's preconsent disclosures must be provided in "a clear and conspicuous statement." This statement must include all the bits of information outlined in this part of Section 7001(c), but it can be presented in any form--even orally. (You must be prepared, however, at some future date to prove what was in your "statement", when it was provided, and what made it clear and conspicuous.) All of the information in this statement is specific to your e-delivery system, not boilerplate.

To be legal, the consumer's consent must be affirmative and it must be given (or confirmed) electronically.

The "test drive" (demonstration) must prove beyond any question that the consumer possesses the hardware, software, and savvy to use your e-delivery system effectively.

The system you are evaluating offers what the vendor calls an "Electronic Records and Signature Disclosure" but it appears to be bypassable. Personally, I don't like bypassable information. You can easily use a cookie, script, or other plain vanilla web technology to force the user of this page to at least click into the page containing the disclosures. If the user has actually seen the preconsent disclosures, it would be hard for him/her to later argue that it wasn't "clear and conspicuous." After reading the linked material, if you're satisfied that it's clear and conspicuous and that it covers everything ESIGN requires, check off part 1.

Part 2 is simple. The statement "I agree to use electronic records and signatures" is affirmative and it will be delivered to you electronically. Check that one off.

Part 3 is always the challenge. "Test drive" is industry jargon that conveys a clearer image of the concept of an ESIGN "demonstration." The object of the test drive is to put the consumer through a simulated e-document delivery using the same hardware, software, and technological savvy the consumer must possess when the time comes for you to e-deliver the e-documents containing the RESPA, Reg. Z, etc. dislcosures. Your vendor's simple checkbox does not, by itself, constitute a test drive. It might not take a great deal more, but you have to study the system and include tests of every potential point where the consumer could fail.

Richard - I agree with everything you said, but have been getting pushback from management (regarding Docusign) that says "well, if the document came back signed that proves they have the capability, right?" My only way to really respond to that is we would have to ensure certain disclosures are mailed timely following if we don't receive the immediate signature... but I was hoping you may have a better response to this. Maybe because they have to prove the "test drive" before receiving/signing?

(outside of Docusign and ESIGN) And then, appraisals. If they email an appraisal with a receipt form, and get the signed receipt back - we can document it was delivered on the date it was signed. BUT, if it never comes back - they would have to mail it and count three days, or have it picked up. Right?

I'm also struggling with answering "if the applicant responds back to the email that had the appraisal with 'I received the appraisal', wouldn't that work?" I'd like to think it would, but am worried about them slipping through the cracks. Are other banks doing this? (They say they are, but they say that about everything) Feel free to ignore me, I'm not sure if I am asking or venting now...

I think I'm going to have the same issue that GIlaMonster is having. Gila, are you buying loans from a place that uses Docusign? If so, we might be talking about the same originator. They are a nationwide originator.

We've discussed this a few times, so you may be able to locate old threads that lay out the issues. Andy and others have mentioned a few court cases involving ESIGN, but I don't remember any of them establishing a bright line test for consent. The courts could put most of the ESIGN disagreements to rest if the right cases ever made it that far. Apparently, that hasn't happened in 17 years.

The problem with the "it worked so it must be legal" argument is that we can't invent free-style ways to make a document "written." Paper is "written" and e-documents that are properly ESIGN-enabled are "written." For the purpose of delivering federal disclosures, nothing else is "written."

ESIGN has confused bankers because isn't like any of the banking regulations we know so well. The closest comparison is the process by which a person obtains a driver's license. "How it works" information (traffic laws) is delivered to the candidate and then s/he has to get behind the wheel and demonstrate to an examiner (a police officer in my case) that s/he can actually operate the vehicle in a safe and effective manner. In this context, the "it worked so...." argument would become: you made it to the DMV alive, so you must be a qualified candidate for a driver's license. The same illustration highlights the foolishness of asking customers to check boxes to "prove" they have the hardware, software, and savvy. Imagine what would happen if anyone could get a driver's license by paying a fee, checking a box that declares "I know how to drive." and skipping the road test.

ESIGN focuses entirely on delivery, not receipt. "Receipt" is a separate issue that's become relevant since I retired 9 years ago, so you'll have to rely on others to discuss what is and is not sufficient to qualify as "receipt" in those cases where a federal regulation requires you to document it. One point is clear, however. Debates (or litigation) regarding "receipt" can't involve ESIGN because it is silent on that subject.

On ESIGN's timeline, valid (informed, demonstrable) consent must be accomplished before sending the first e-document containing consumer disclosures. If you send first and worry about consent later, what you sent is not "in writing" and you violate the law/regulation that required the consumer disclosure. Using an automated solution means that any violations are most likely systemic (class action material.)

BSAguy, I'm going to send you a PM. Richard - you explain things amazingly well, and I genuinely appreciate it. I love the driving analogy.