Digital Signature Laws Must Protect Consumers

A window salesman talks an elderly woman into buying 10 windows for US$10,000. She signs several papers, including one whereby she consents to receive the contract and all notices relating to the sale over the Internet at an e-mail address established for her by the salesman. She doesn't own or know how to use a computer. The window salesman doesn't provide any paper copies of the documents.

A savvy young man decides to buy a car but finds he must first sign a consent form similar to the one presented to the elderly woman. He objects, but the salesman says if the young man doesn't agree to receive everything electronically, the car's price will rise by $1,000.

A professor shops the Web for a PC and enters into a contract to buy one. He agrees to receive the contract and other legal documents electronically. His copy of the contract is sent in WordPerfect 6.0 format; to open and print it, he must save it as a Microsoft Word file. The computer arrives but isn't the one he ordered or the one referred to in his contract. He contacts the computer dealer and is told that he received what the dealer's version of the contract indicates. The professor's attorney tells him he is stuck: He doesn't have a copy of the contract that he can use in court, and terms in the contract that he was sent don't match the terms on the Web page.

All of the situations depicted in these scenarios are currently illegal but would be made legal under HR 1714 -- the Third Millennium Digital Commerce Act -- which overwhelmingly passed the House of Representatives in November, despite the threat of a presidential veto. The bill, under the guise of facilitating e-commerce, would eviscerate numerous state and federal consumer-protection laws. If the act is made law, states would be prohibited from passing e-commerce laws to protect their own citizens.

A much more judicious bill on the same subject passed the Senate soon after.

However, the Senate version -- S 761 -- allows consenting parties to enter into contracts using electronic records and electronic signatures. States are permitted to protect their consumers as they deem fit.

The Federal Trade Commission and consumer groups have objected to the overreaching provisions of the House bill. The consumer groups have proposed the following basic standards for a federal law that governs e-commerce:

1. Electronic disclosures should be permitted only when the transaction is initiated and consummated electronically.

2. When electronic signatures are required, the technologies used must be reasonable, reflect an actual intent to sign a document (not merely opening a package of shrink-wrapped software) and be attached only to documents that are unalterable after the signature is attached.

3. The consumer should be given the opportunity to accept or refuse disclosures electronically without surcharges.

4. The consumer must be able to obtain paper copies at a reasonable cost and in a timely manner.

5. The disclosures must actually be delivered to the consumer's e-mail address with a reply requested or must be retained on the seller's Web site for the duration of the contract.

6. When disclosures are provided to consumers through a seller's or creditor's Web site, they must be retained for the duration of the contract.

7. The electronic record must be accessible and retainable by the consumer. It must also be provided in a format that prevents alteration after it's sent, so it can be used to prove the terms of the record in a court of law.

8. The consumer's failure to respond to the consent request should trigger paper disclosures, before the failure to respond triggers default.

Let Congress know that digital signature legislation must take into account the practical issues that are important for consumer protection.

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