Going Paperless and Complying with the E-Sign Act

Profile ImageBy Matthew Young, Attorney

As more and more credit union members move to online banking, credit unions are similarly encouraging members to accept electronic statements in lieu of paper statements as part of their online banking service. The advantages of doing so are several, not the least of which is saving money on paper and postage costs.

In light of this increasing shift, I want to remind credit unions of their legal obligations under the E-Sign Act.  Credit Unions must get a consumer’s affirmative consent to communicate electronically with the member.  However, before this is done the credit union must clearly and conspicuously inform the member of any right they have to records in a physical form, the right to withdraw consent and the consequences of doing so along with any fees imposed in the event of consent withdrawal. Moreover, the credit union must inform the member of the categories of information to which the consent applies, most commonly determined on a product-by-product basis.

Additionally, the credit union must disclose the procedures by which a member can withdraw consent and update consumer contact information, the hardware and software requirements necessary to obtain access to the electronic records along with updated notices should the hardware or software requirements change. Finally, the affirmative consent must be obtained, “in a manner that reasonably demonstrates that the consumer can access information on an electronic form that will be used to provide the information that is the subject of the consent.” For example, a member providing consent via a click wrap agreement online through the credit union’s home banking product would generally comply with this requirement.

Both credit unions and their members can benefit from electronic banking and the accompanying electronic statements; however, it is important for credit unions to be familiar with the E-Sign Act through this process to avoid non-compliance with various regulations.

[1] 15 U.S.C. Section 7001(c)(1)(C)(ii)

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