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Compliance: What CUs Should Know about ESIGN

Mon, Aug 21, 2017

The Electronic Signatures in Global and National Commerce Act of 2000 (ESIGN) grants electronic signatures the same legal validity and enforceability as paper records and handwritten signatures. For credit unions, this also means information required to be made available can be delivered electronically, as long as the credit union complies with ESIGN’s requirements.

A recent CUNA CompBlog back-to-basics post examines what credit unions should know about ESIGN.

  • Pre-Consent Disclosures: ESIGN requires a consumer's “affirmative consent” (i.e., voluntary opt in) to conduct business electronically. Businesses cannot convert consumer accounts to online accounts without first obtaining consumers’ affirmative consent.  Before obtaining consent, consumers must be provided with a statement informing them of their rights regarding the transaction, and a statement of hardware and software requirements for access and retention of electronic records;
  • Affirmative Consent: A consumer must consent electronically, or confirm his or her consent electronically in a manner that “reasonably demonstrates” s/he can access information.  "Reasonable demonstration" means that a credit union’s consumer consent process must include a method for members to "demonstrate" that they can access the required disclosures in the electronic format that the credit union plans to utilize;
  • Record Retention: An electronic record will satisfy a statute or regulation's record-keeping requirements if the record accurately reflects the information in the contract or other record; and remains accessible to anyone who is legally entitled to access.

ESIGN does not apply to:

  • Wills, codicils, or testamentary trusts;
  • Laws governing adoption, divorce, or other matters of family law;
  • All articles of the Uniform Commercial Code (except Section 1-107, Section 1-206 and Articles 2 and 2A);
  • Court orders or notices, or official court documents required to be executed in connection with court proceedings;
  • Any notice of:
    • Cancellation or termination of utility services;
    • Default, acceleration, repossession, foreclosure, or eviction, or the right to cure, under a credit agreement secured by, or a rental agreement for, a primary residence of an individual;
    • Cancellation or termination of health insurance or benefits or life insurance benefits (excluding annuities); or
    • Recall of a product, or material failure of a product, that risks endangering health or safety;
  • Any document required to accompany any transportation or handling of hazardous materials, pesticides, or other toxic or dangerous materials.

For more detailed information, visit CUNA’s e-Guide to Federal Laws and Regulations, accessible via and CUNA’s Compliance Community.