Senate Validates E-Signatures

June 16, 2000

By Jim Abrams
Associated Press Writer

WASHINGTON ?? Congress cleared a path for the exploding growth of electronic commerce by passing legislation that will give a signature or record sent through cyberspace the same legal validity as a pen-and-paper document.

Under the legislation (S. 761 approved 87-0 by the Senate Friday, businesses could seal multimillion-dollar deals with the click of a mouse and consumers could complete a home mortgage or buy a car without ever setting foot in an office.

The bill, some two years in the making, passed the House Wednesday by 426-4. President Clinton strongly endorses the measure, saying it would "encourage the information technology revolution."

While e-commerce is expected to triple over the next three years to some $1.6 trillion a year, there has been no nationwide framework for giving an electronic signature the same legal status as a paper document. A consumer can get a quote for an insurance policy over the Internet, but he still has to sign on the dotted line to get the policy.

"This legislation will eliminate the single most significant vulnerability of electronic commerce, which is the fear that everything it revolves around ... could be rendered invalid solely by virtue of their being in electronic form," said Sen. Spencer Abraham, R-Mich., a key supporter of the measure.

Both the House and Senate passed electronic signature bills last year, but reaching a compromise proved elusive, partly because of concerns from the White House and some consumer groups that it would expose consumers to abuses. The worry was that businesses could send e-mail notices of rate hikes or recalls to customers without the computer skills or technology to get the information.

The business community, said Rep. Ron Wyden, D-Ore., saw the legislation as "a chance to save billions and billions of dollars and thousands of hours" devoted to record keeping. But consumer groups were "extremely frightened" by the possibilities for abuse.

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 with paper. Businesses must confirm that customers have the necessary hardware and software to receive electronic documents.

Notices of termination, such as health insurance lapses, electricity cut-offs or evictions, would still have to be delivered by paper.

The bill does not define how online transactions will take place. The two involved parties can reach agreement on a contract format or they can go through a growing number of third parties offering software verifying the authenticity of electronic signatures.

Supporters said the impact of the legislation will be felt well beyond American shores. "The rest of the world watches us and follows our example and what we have produced here is a charter for the next growth phase of e-commerce," said Sen. Patrick Leahy, D-Vt.

Under the measure, the Commerce Secretary is directed to promote the use and acceptance of electronic signatures and records worldwide.

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