Recently, President Clinton picked up something that looked like a credit card, swiped it through a machine, typed in a password (“buddy,” for his dog), and up on a screen popped the presidential signature.
With his digital signature on the Electronic Signatures in Global and National Commerce Act (S. 761), contracts signed by a computer will now be viewed in the same way as those signed with a pen.
The president noted in his remarks at the signing ceremony that digital signatures and internet commerce are important tools of global and national economies.
“Firms across America are moving their supply and sales channels online, improving customer service and reducing costs,” the president said. By making electronic signatures fully valid, he said, “companies will have the legal certainty they need to invest and expand in electronic commerce.”
“Online contracts will now have the same legal force as equivalent paper contracts,” Clinton said. “With the swipe of a smart card and the click of a mouse, (customers) will be able to finalize mortgages, sign insurance contracts, or open brokerage accounts.”
The law goes into effect October 1. As of March 1, 2001, companies can begin to electronically retain legal records such as mortgages and financial securities. The final bill makes clear that consumers must “opt in” to electronic signature agreements, and must consent to receiving records and documents electronically rather than on paper.
It’s up to businesses to confirm that their customers have the necessary hardware and software to receive electronic documents. Two parties may agree on an electronic platform for their transaction or use a third-party company to verify the authenticity of electronic signatures.
But not everything can be delivered electronically. For example, notices of health insurance termination due to nonpayment of premiums, electricity or heat shut-off, or an eviction must still be delivered on paper.
The question consumers should be asking is this: What’s the rush?
Since 1994, the Internet has profoundly changed the way people buy and sell things, mostly for the better.
Consider the world of real estate. By putting an almost infinite amount of information into the hands of consumers, the Internet has made it far easier to shop for a home loan, get a sense of what your house is worth, view properties for sale, compare and purchase homeowners’ and general liability insurance, and even list your home for sale on your own.
You can go online and with a few clicks, apply for a home loan. Several companies will allow you to auction your home online.
With new transaction management platforms, you’re now able to view all of the documents related to your home purchase or sale electronically. You can upload your personal information, details about the property, the inspection report, purchase and sale contract, loan documents and other information.
But when it comes to actually signing a loan for the largest single purchase you’re ever going to make, electronic signatures may make it so easy for consumers that they’ll fail to read the very documents they now have access to 24 hours a day, 7 days a week.
As it is, many consumers never read through their entire loan documents. They don’t look at the survey report until after the closing. They rely on their broker or attorney or escrow agent to do the looking for them.
But if you have to sign a piece of paper a dozen times or more in a closing, the very physical act of picking up the pen and writing your name across the page may cut through the information haze that occurs in the late stages of buying property – a time filled with seemingly endless and mind-numbing details about moving, changing your address, setting up new utility services, packing and the final walk-through.
And at that moment, with pen in hand, you may just focus on the fact that you’re about to sign a note that promises you’ll pay back – with interest – a huge sum of money equal to two or three times your gross annual income.
Are you going to feel the same way about clicking your mouse?
Because buying a home isn’t like buying a share of stock, a pair of jeans, or even a car. If you send a dozen roses over the Internet to your parents on their anniversary, and something gets screwed up, you’re out perhaps $50 to $100. If your dot.com bookseller doesn’t deliver the book you ordered, you can call the company and they’ll either send out your order again or cancel the charge to your credit card.
But if you carelessly attach your electronic signature to a loan for several hundred thousand dollars, you can’t just cancel it the morning after.