Two e-signature bills held from vote

Two e-signature bills held from vote

By Rod Perlmutter, News Editor, Media Central

KANSAS CITY, Mo., Oct. 29, 1999  (MediaCentral) Last Tuesday was the day some politicians thought one chamber of Congress was going to approve an “e-signature” bill and send it to the other chamber for approval.

That didn’t happen on Oct. 26 — despite efforts in both the U.S. House of Representatives and the Senate.

Instead, attempts to approve without debate bills on the floors of both chambers were rebuffed.

There is bipartisan support for giving more legal authority to electronic signatures, which are defined as an “electronic sound, symbol, or process attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the electronic record.” The bills before Congress also identify an electronic agent as “relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.”

But the bills are caught up in a debate between those who are pushing to remove what they see as archaic barriers to e-commerce that could hinder America’s economy, and those who fear that current legislation will strip current consumer protection laws and increase the chances of fraud over the Internet.

E-SIGN did not come to a vote in the House

Last week, HR 1714, the Electronic Signatures in Global and National Commerce Act (E-SIGN), was placed on the House “suspension calendar,” which is a parliamentary device used to expedite the process of passing legislation that has broad support and is not likely to be opposed on the floor, a Commerce Committee spokesman said. Bills on that calendar are approved, sometimes on voice vote, without any amendments placed on them.

But earlier this week, the House quietly withdrew the bill from the suspension calendar, said a Commerce Committee spokesman on Friday. The bill was withdrawn, the spokesman said, because “details had not been hammered out yet,” and the bill may come up for a vote next week.

The E-SIGN bill was cosponsored by Commerce Committee Chairman Tom Bliley (R-VA) and Rep. Tom Davis (R-VA. The House Commerce Committee approved the bill on Aug. 5, just two weeks after two subcommittees, Finance and Hazardous Materials and Telecommunications, Trade and Consumer Protection, approved it in July.

The bill would allow electronic technology to be used in a variety of ways:

  • An electronic signature or electronic record could be used for contracts for interstate commerce. Parties to the contract could negotiate to the terms and conditions in which they would accept these electronic records;
  • When a law requires that a contract be in writing, that requirement would be satisfied by an electronic record, as long as all parties agree to its form and the record can be accessed later by all parties for verification;
  • A contract cannot be denied legal effect solely because its formation involved the interaction of electronic agents.

The bill also requires the U.S. Commerce Department to:

  • promote the principles of e-signatures overseas;
  • report to Congress, within 18 months of the bill’s passage, on actions taken by federal agencies to remove barriers to e-commerce, and, if needed, legislation that is needed to remove those barriers;
  • report to Congress, along with the Federal Trade Commission, within two years, on the effectiveness of federal and state consumer protection laws covering e-commerce.

This year, several e-commerce businesses, particularly online brokerages, testified in favor of the bill.

If HR 1714 passes the House, it may run into opposition in the Senate. Sen. Patrick Leahy (D-VT) has called HR 1714 “radically preemptive” because he says it overrides many state consumer protection laws. He has backed proposals by Rep. Howard Berman, (D-CA), which were backed by the House Judiciary Committee.

 No vote on Digital Commerce Act in Senate

On Tuesday, Leahy helped stopped an effort by Sen. Abraham to get another e-signature bill, this time in the Senate. Sen. Spencer Abraham (R-MI), asked the Senate to pass S. 761, the Millennium Digital Commerce Act, by unanimous consent.

Leahy, who had proposed a compromise bill with Abraham, objected, saying that the bill Abraham wanted the Senate to approve was not the version Leahy had worked on.

Abraham said the Senate Commerce Committee unanimously approved the bill on June 23 and the bill had President Clinton’s support. He said Leahy and Sen. Paul Sarbones (D-MD) had objected and halted an August attempt to approve the bill on unanimous consent.

“Since that time, we have worked to try to incorporate some of the changes and some of those considerations into the legislation to address consumer protection concerns while still providing the tremendous benefit of electronic signatures to the public which was intended by the legislation,” Abraham said.

“I believe the substitute which we would propose to offer does just that,” Abraham continued. “As was the case with the legislation which passed the Senate Commerce Committee, the substitute will promote electronic commerce by providing a consistent framework for electronic signatures in transactions across all 50 States.”

“That framework is simply a guarantee of legal standing in each of those States,” Abraham said. ” Such a guarantee will provide the certainty which today is lacking and will encourage the development and the use of electronic signature technology by both businesses and consumers.”

Abraham said S. 761 would allow people to secure loans on line for the purchase of a car, home repair, or a new mortgage by giving both companies and consumers the legal certainty they need.

However, he said, the bill now includes safeguards to guarantee that electronic records will be provided in a form that accurately reflects the original transaction and which can be reproduced later.

“This legislation cannot continue to wait,” Abraham said. “We have tried on several occasions already to bring it to the floor. We tried to pass it through unanimous consent agreements. We have tried to negotiate. So far we have been unsuccessful.”

Abraham listed America Online, American Bankers Association, American Council of Life Insurance, American Electronics Association, and 45 other financial institutions, ISPs, e-commerce companies, and trade associations that favor the bill.

Leahy, in a statement that was submitted into the Congressional Record the next day, said that when the Senate Commerce Committee held its hearings on S. 761 on May 27, “neither the Federal Trade Commission, nor state consumer protection authorities, nor any consumer advocates, were invited to testify at those hearings. Sometimes it seems that we forget that the purpose of commerce is to provide goods and services for consumers.”

More than a dozen consumer protection groups, including Consumer Union, National Center on Poverty Law, National Senior Citizens Law Center, and the Privacy Rights Clearinghouse, objected to the original S.761, Leahy said.

For example, the National Consumer Law Center wrote that S. 761:

  • would preempt every state and federal law that requires a paper writing to be provided to a consumer.
  • allow business to provide essential consumer information exclusively online – regardless of whether the transaction occurs on or offline. The center wrote that nearly two-thirds of the American public, and a larger percentage of low-income citizens, did not have Internet access. This provision would limit their access to important information.
  • would permit electronic disclosures to substitute for paper notices even when the consumer doesn’t know that he or she has consented to electronic communication, doesn’t have a computer, or can’t print the information when it is received.

The center concluded that the bill was too closely weighted toward e-commerce companies and not consumers.

“Congress should not pick technology winners and losers,” the center reported. “(S.761) poses a threat to technical advancement. By blessing the use of unproven -many believe insecure – technical applications, Congress may unintentionally harm consumers and retard the development of truly robust technical tools for electronic commerce.”

In August, Leahy and members of some consumer protection groups met repeatedly with Abraham about revising the original S.761. In September, Leahy said he and Abraham received help from the Commerce Department and the FTC, and, by the end of the month, they had put together “a Leahy-Abraham substitute to S.761.”

But the bill Abraham tried to get the Senate to approve on Tuesday was not that substitute. Instead, it was closer to the original bill to which Leahy and the consumer protection groups objected.

Leahy denied Abraham’s assertion that the Clinton Administration backed S.761. Instead, he said, both the Commerce Commission and the FTC either opposed it or had serious questions about it.

In an Oct. 12 letter to the House Judiciary Committee, Andrew Pincus, the general Counsel of the US Department of Commerce, said though he supports the general objective of e-sign legislation, the department opposed HR 1714, which is similar. “The bill…would still preempt state law unnecessarily;…invalidate numerous state and federal laws and regulations designed to protect consumers and the general public; and otherwise create legal uncertainty where predictability is the goal.”

Similarly, Pincus wrote, S. 761 had a similar “spillover” effect on state consumer protection laws, and he opposed them.

The Commerce Department would prefer that each state adopt the Uniform Electronic Transactions Act, but , while waiting for the states to act, would approve a limited federal law that recognizes the legal standing of e-signatures. Pincus wrote: “This legislation should be limited to a temporary federal rule to ensure the validity of electronic agreements entered into before the state have a chance to enact UETA. Once the UETA is adopted by a state, the federal rule in unnecessary, and it should ‘sunset.'”

Leahy said while he is committed to some parts of the current S. 761, he is opposed to others.

“We need to ensure that contracts are not denied validity that they otherwise have simply because they are in electronic form or signed electronically….I agree that consumer should be able to contract online, but that is not the issue,” Leahy said in a statement released Friday.

“Consumers already can contract for most things online, as anyone who has heard of such businesses as or knows. The issue here is whether we are going to allow public interest protections now applicable to private paper transactions to be circumvented simply by conducting the same transaction electronically.”

Leahy said that Abraham’s revisions unnecessarily strip the authority of states to protect citizens. “(It) can have only one possible objective, which is to prevent states like Vermont or California or Michigan from passing e-commerce legislation that is more protective of consumers than federal law.”

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© 2000 Media Central, an IndustryClick community. All rights reserved.

Permission to repost article granted by IndustryClick


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