On July 25, the Law Society of England and Wales released a practice note on the use of electronic signatures when executing commercial contracts in a business context. Developed by a joint working party of the Law Society, the City of London Law Society, and leading City law firms, the practice note is intended to provide industry participants with greater clarity on the relevant laws surrounding the use of e-signatures on commercial contracts. According to Law Society Company Law Committee chairperson Elizabeth Wall, the practice note “will help the industry get comfortable with electronic signatures and embrace the practice benefits of e-signing.”
Recently, the British Columbia Labour Relations Board (Board) issued a decision accepting a trade union’s application under the Labour Relations Code, which was submitted using electronically signed membership cards. Although the Board found that the union’s use of the Adobe E-Sign software was in compliance with the Electronic Transactions Act, it only accepted three of the four e-signed cards that were submitted. The three cards it approved were completed using the “draw function” of Adobe E-Sign, which allows the user to use a finger or stylus to physically sign a touch screen device. In contrast, the Board did not accept the fourth card because it used the “type function” of the software instead, analogizing it to “a pen and paper printed block signature in quotation marks.”
According to the Board, the fact that the E-sign software contained mandatory fields for the employee’s name, signature, and date provided assurance that the cards were signed and dated at the time of signature. In the event that E-sign programs other than Adobe are used, the Board cautioned that it “will expect a similar demonstration of [membership signatures’] reliability and authenticity with regard to date and signing of the cards before the application for certification process is completed.” It further cautioned that e-sign applicants will be expected to identify the audit trail for electronic signatures at the time applications are filed.
New York Supreme Court Reverses Lower Court’s Ruling in Foreclosure Case; Observes eNote and Transfer History Sufficient under ESIGN
On April 13, the New York Supreme Court, Appellate Division, Second Department issued an opinion reversing a lower court order dismissing a foreclosure action against a borrower who signed a mortgage note electronically (“eNote”). New York Community Bank v. McClendon, 2016 N.Y. Slip Op. 02790 (N.Y. Supp. April 13, 2016). In the proceedings below, the lower court had granted the borrower’s motion to dismiss the foreclosure complaint for lack of standing, accepting the argument that the plaintiff mortgagee lacked standing because it could not produce a chain of valid assignments of the eNote from the original lender to itself. In opposition to the motion to dismiss, the mortgagee had submitted, among other things, a copy of the eNote and a print out of an electronic record of the transfer history of the eNote (“Transfer History”) showing a chain of transfers from the original lender to itself. The court observed that the eNote qualified as a “Transferable Record” under Section 201 of the Electronic Signatures in Global and National Commerce Act (“ESIGN”) and that a person is in “control” of a Transferable Record if “a system employed for evidencing the transfer of interests in the transferable record reliably establishes that person as the person to which the transferable record was issued or transferred.” Citing the UCC, the court further observed that the holder of the eNote would have standing to foreclose and that any person with “control” of the eNote is its holder. After establishing this legal framework, the court concluded that the Transfer History, together with the eNote, were sufficient to establish that the plaintiff mortgagee had control of the eNote under ESIGN and therefore had standing to foreclose as the holder. According to the court, because these rules governing Transferable Records applied to the eNote, the failure of the plaintiff mortgagee to produce proof of assignment was “irrelevant” and the complaint should not have been dismissed for lack of standing.
Special Alert: CFPB Issues Guidance Regarding Preauthorized Debit Transactions Under the Electronic Fund Transfer Act and Regulation E
On November 23, 2015, the Consumer Financial Protection Bureau (“CFPB”) released Compliance Bulletin 2015-06 (“Bulletin”), which provides industry guidance on the Electronic Fund Transfer Act (“EFTA”) and Regulation E requirements for obtaining consumer authorizations for preauthorized electronic fund transfers (“EFTs”). The CFPB issued this Bulletin, in part, because it observed during its examinations that some companies are not fully complying with the EFTA and Regulation E. Principally, this Bulletin addresses two areas of concern: (i) obtaining the customer’s authorization for preauthorized EFTs over the telephone; and (ii) providing a copy of the authorization to the customer. Read more…
On January 8, Kofax Limited, a California-based software company, released SignDoc Enterprise, a product that allows lenders to capture and process electronic signatures. The software gives consumers the ability to sign and return documents securely from their personal computer or mobile device. The software also supports “click to sign” and handwritten signatures, and can capture biometrics at the time of signing for greater security and authentication.