While businesses are gearing up for the impact of the recently passed Electronic Signatures in Global and National Commerce Act, the banking industry could find itself in a new role: the notaries public of the Internet.
The Electronic Signatures in Global and National Commerce Act, with an effective date of Oct. 1, 2000, was adopted by Congress on June 16 and signed by the President on June 30. Three years earlier, the Mississippi Legislature passed the 1997 Digital Signatures Act. With Congress passing the electronic version, many business consumers have asked: What’s the difference between digital and electronic signatures?
“Digital signature is a subset of electronic signatures,” said Benjamin Wright, a Dallas attorney and author of The Law of Electronic Commerce, contracted by the state to assist with implementation of the new law. “A digital signature is a little bit of a confusing term because it means different things to different people. To a class of very technologically-oriented people, a digital signature refers to a certain kind of complex cryptography. Congress spoke in terms of electronic signatures, which embraces the entire universe of electronic signatures. Digital signature is just one of many of the technologies available.”
The Mississippi Secretary of State’s office describes a digital signature this way: a computer-entrusted code that protects the authenticity of electronically filed documents. Many online retailers, with codes that guard against tampering and allow both parties to have confidence that information transmitted is complete and accurate, currently use versions of these codes.
“Digital signatures will dramatically speed up doing business,” said Secretary of State Eric Clark. “Many businesses, from banks to insurance companies, can cut down on paperwork and speed up service to their customers. In the future, we could see consumers go online to set up a company, borrow money for financing and arrange for suppliers to send products, all without signing a single piece of paper.”
Digital signatures cannot be used on sensitive documents such as adoptions, wills, cancellation of health insurance benefits, product safety recalls, mortgage foreclosures or utility cancellations, and must be used by mutual consent of both parties.
“Banks are well suited for the role of certification authorities because they are considered agents of trust,” said Wright.
But are banks technologically savvy enough to play the role?
Yes, said Page Ogden, president of the Mississippi Bankers Association and president of Natchez-based Britton & Koontz.
“A lot of the technology surrounding digital signatures guarantees the integrity of the message going from point A to point B, and encrypts it on a public super electronic highway,” Ogden said. “One idea that the American Bankers Association has put forward is that the banking industry would be the ideal party to serve that function for identity of a digital signature. Conceivably, at some point, you’d pay a fee to a bank to basically say that, when you affix your digital signature to an electronic document, you are who you say you are. The role of banking is not only as a financial and informational intermediary, but as a provider of facilitating commerce on the Web.”
Since the digital signatures law became effective July 1, 1998 in Mississippi, not many businesses have embraced the technology, said Clay Kittrell, director of administration for the secretary of state’s office.
“It’s been used a little bit in government circles, but not used very much in the private sector,” Kittrell said. “Why? The technology is a bit cumbersome. Even people who deal with it frequently and know the process well have a difficult time describing it.”
Does the federal law preempt the 1997 Digital Signature Act?
“No,” Kittrell said. “State law says the use of this high-level digital signature technology is one way to do a signature. Federal law says lots of different technologies can be used.”
Several years ago, when states started passing digital signature laws, a national conference committee on uniform state laws collaborated to work on language for interstate commerce. Last year, the Uniform Law Commissioners mandated the Uniform Electronic Transactions Act (UETA). Even though many states had already adopted legislation pertaining to such matters as digital signatures, UETA represented the first national effort at providing uniform rules to govern transactions in electronic commerce that should serve in every state.
“The impact of the new federal law, with respect to electronic signatures, is symbolic,” Wright said. “It helps businesses feel more confident in their use of electronic signatures when they see Congress pass a sweeping law like this. However, businesses are going to be wasting their time if they spend very much effort trying to analyze the differences between the existing law in Mississippi and the new federal law.”
“There are some interesting theoretical kinds of questions that might come up that a law school class could debate for an entire semester, and it’s just great fun,” he said. “But practical businesses or financial institutions probably won’t find that discussion very interesting or useful, such as, ‘was it necessary for Congress to do something?’ Regardless of whether it was necessary, or the precise scope of what Congress did or did not do, the laws are clear in Mississippi and nationwide: electronic signatures are legal. The more interesting questions from the point of view of a businessperson is not so much, ‘is it legal?’ But what is ‘it’?” There’s a wide spectrum of technologies out there, and as a practical matter, businesses have to make decisions on the kind of technology to buy, install and use. Congress — and the state Legislature — didn’t answer that question. Neither are they in the business of specifying technology.”
Contact MBJ contributing writer Lynne Wilbanks Jeter at email@example.com or (601) 853-3967.