Don't Click on the Dotted Line Just Yet
The push for e-signatures is strong--but resistance remains
In a year of Capitol Hill gridlock, e-lobbyists reckoned that they could at least give Web-based transactions a giant boost by expanding the use of electronic signatures. After all, in this increasingly digital world, who would possibly oppose a law that treats electronic signatures just like the pen-and-ink variety?
Alas, the insiders guessed wrong. What started as a simple bill has consumer groups battling with insurance companies, states banging heads with Congress, and of course, the Administration at odds with Capitol Hill.MORE SECURE. On Oct. 26, the legislation's backers, led by House Commerce Committee Chairman Tom Bliley (R-Va.) and Senator Spencer Abraham (R-Mich.), were scrambling to forge a compromise. They had thought the solution was easy enough. Businesses see the Internet as a way to slash paperwork costs. But first they have to be sure that electronic transactions are considered as legally binding as contracts signed with an old-fashioned John Hancock.
With that assurance, commercial deals could be completed without the time and expense of sending papers via snail mail. Individuals could open a brokerage account or buy a car without appearing in person or signing before a notary public--a proof of identification that has been around since the Middle Ages. And routine paperwork, such as monthly mutual-fund statements and even tax documents, could be transmitted more cheaply and safely. "Electronic-signature technology is actually more secure than pen and ink," argues W. Hardy Callcott, general counsel of Charles Schwab & Co.
Today, at least 44 states have laws governing e-signatures and electronic record-keeping. The trouble is, no two sets of laws are the same. The state of Washington, for instance, recognizes the validity of digital signatures only, while Virginia allows the use of thumbprints and eyeprints, too. As a result, businesses say they cannot take full advantage of digital commerce.
That's precisely why everyone from financial-services executives to old-line manufacturers asked Congress to write a single set of rules that would apply to all business. But states, consumer groups, and the Clinton Administration are all wary of the congressional efforts.
For instance, state officials insist that they, not the feds, have historically regulated commercial transactions. "What's the federal government going to do, write a whole new set of laws for electronic commerce?" asks John McCabe, legislative director of the National Conference of Commissioners on Uniform State Laws.
McCabe's group has an alternative solution: a uniform statute that all states can adopt. But the one state, California, that has passed it so far has made crucial changes, such as curbing the use of digital signatures on many financial transactions. And business executives, worried that such rewrites defeat the idea of a single standard, want federal law to govern electronic transactions, at least until a state adopts the uniform code.SCANT PROTECTION. Consumer groups are objecting, too. They fear that the laws proposed so far by Abraham and Bliley do not afford buyers enough protection, even though the bills are likely to require that businesses get customers' approval for all electronic transactions and notices. "Our big concern is that you could be asked in the small print of a contract to agree to receive electronic records that you now get on paper," explains Margot Saunders, managing attorney of the National Consumer Law Center.
And Saunders notes that many consumers still don't have access to the Internet. Besides, she says, people who switch Internet service providers frequently lose e-mail.
Still, with such powerful political support for e-commerce, these issues will eventually get resolved, and digital transactions will become standard practice. It just may not happen this year.By Howard Gleckman in WashingtonReturn to top