E-Commerce and Micro Lending

Chip RaineyChip RaineyGreenberg Traurig, L.L.P.Greenberg Traurig, L.L.P.

1000 Louisiana, Suite 18001000 Louisiana, Suite 1800

Houston, Texas 77002Houston, Texas 77002

(713) 374-3529(713) 374-3529

Austin Number: (512) 485-3143Austin Number: (512) 485-3143

raineyc@gtlaw.comraineyc@gtlaw.com

Gil RudolphGil RudolphGreenberg Traurig, L.L.P.Greenberg Traurig, L.L.P.2375 East Camelback Road2375 East Camelback RoadSuite 700Suite 700Phoenix, AZ 85016Phoenix, AZ 85016(602) 445-8206(602) 445-8206rudolphg@gtlaw.comrudolphg@gtlaw.com

Agenda

Contract FormationContract Formation Attribution and Authorization IssuesAttribution and Authorization Issues Strategies for Showing AssentStrategies for Showing Assent Making Required Disclosures to Making Required Disclosures to

Consumers ElectronicallyConsumers Electronically Keep Records to prove AssentKeep Records to prove Assent Put Strategies to use – examplesPut Strategies to use – examples

Attribution – Who clicked that mouse?

Attribution

The effect of attribution or The effect of attribution or authentication of an electronic signature authentication of an electronic signature to a particular party is determined, just to a particular party is determined, just as in the physical world, from the as in the physical world, from the context and surrounding circumstances context and surrounding circumstances (including agreed-upon security (including agreed-upon security procedures) at the time of creation, procedures) at the time of creation, execution or adoption of the signature.execution or adoption of the signature.

Attribution – New Customers

Much harder since no shared secretsMuch harder since no shared secrets

New technologies are not widely usedNew technologies are not widely used PKIPKI BiometricsBiometrics

How do you verify identity?How do you verify identity?

Good guidance provided by U.S. Dept. of Good guidance provided by U.S. Dept. of Ed., Ed., Standards for Electronic Signatures in Standards for Electronic Signatures in Electronic Student Loan TransactionsElectronic Student Loan Transactions..

AttributionNew Customers Once a new borrower is authenticated, then subsequent Once a new borrower is authenticated, then subsequent

communications may be attributed to that borrower by use of communications may be attributed to that borrower by use of PIN or other credential, together with other secret information.PIN or other credential, together with other secret information. The issuance of PIN or other credential must be via secure The issuance of PIN or other credential must be via secure

online session, or USPS, and not be email sent in the openonline session, or USPS, and not be email sent in the open Before issuing PIN or credential to a new borrower coming over Before issuing PIN or credential to a new borrower coming over

the Internet, confirm identity by at least 2 data matching sources the Internet, confirm identity by at least 2 data matching sources from the following resources:from the following resources: National credit bureauNational credit bureau Commercially available databasesCommercially available databases State motor vehicle agenciesState motor vehicle agencies Government databasesGovernment databases

At a minimum, verify borrower’s name, social security number, At a minimum, verify borrower’s name, social security number, driver’s license number and date of birth.driver’s license number and date of birth.

Attribution – New Customers

Verify information given by customer

Check public databases of phone numbers, addresses and credit reports

Authentication Service Bureau

Provides authentication services on an outsource basis

Drivers license can be verified

Attribution – Existing Customers

Much easier since you have existing Much easier since you have existing customer information to verify customercustomer information to verify customer

PIN/PasswordPIN/Password

Shared SecretShared Secret

IRS e-file requires prior year IRS e-file requires prior year Adjusted Gross Income, SS # and Adjusted Gross Income, SS # and birthdaybirthday

Amount of last month’s billAmount of last month’s bill

What is Assent?

Strategies for Assent Case law is still relatively sparse, but

trends are emerging

Goal: Avoid disputes on validity of assent

The Strategies incorporate the requirements of Federal E-Sign Act and UETA

Determine the Law That Applies

ESIGN, passed in 2000, was designed ESIGN, passed in 2000, was designed to add uniformity and was based upon to add uniformity and was based upon the Model Version of UETAthe Model Version of UETA

But ESIGN provides for a reverse But ESIGN provides for a reverse preemptionpreemption

ESIGN specifically does not apply to:ESIGN specifically does not apply to: UCC, other than Art. 2 and 2AUCC, other than Art. 2 and 2A Tape recordings of oral conversationsTape recordings of oral conversations

UETA, ESIGN and Notes

Does not apply, generally, to UCC Article 3 Does not apply, generally, to UCC Article 3 (negotiable instruments) -- but should apply (negotiable instruments) -- but should apply to notes not subject to Article 3.to notes not subject to Article 3.

Does apply, under UETA, if the borrower Does apply, under UETA, if the borrower expressly consents that the electronic note is expressly consents that the electronic note is a “Transferable Record.”a “Transferable Record.” ESIGN only applies to loans that are ESIGN only applies to loans that are

covered by UCC if a “transferable record” covered by UCC if a “transferable record” and secured by real estate.and secured by real estate.

Also, should apply to a CSO contract, which Also, should apply to a CSO contract, which is a separate agreement from the note.is a separate agreement from the note.

What is a “Transferable Record”

This is an electronic record that purports to This is an electronic record that purports to be a note (i.e. a promise by the borrower to be a note (i.e. a promise by the borrower to pay a sum certain), and to which the borrower pay a sum certain), and to which the borrower has specifically consented may be transferred has specifically consented may be transferred to a new holder electronically. There must be to a new holder electronically. There must be only a single, verifiable copy of this record. only a single, verifiable copy of this record. UETA Sec. 16.UETA Sec. 16.

Note that a consumer’s consent to receive Note that a consumer’s consent to receive electronic records and notices is non-electronic records and notices is non-transferable, so the new holder must secure a transferable, so the new holder must secure a separate consent.separate consent.

FRB Requirements For Electronic Disclosures Although similar language is found in Although similar language is found in

most FRB regulations, Reg E provides a most FRB regulations, Reg E provides a concise statement as to requirements concise statement as to requirements beforebefore using electronic means to make using electronic means to make disclosuresdisclosures

FRB Requirements For Electronic Disclosures“ (c) [Persons] that uses electronic communication …shall:

“(1) Send the disclosure to the consumer's electronic address; or“(2) Make the disclosure available at … an Internet web site; and“(i) Alert the consumer of the disclosure's availability by sending a notice to the consumer's electronic address [or physical address]… The notice shall identify the account involved and the address of the Internet web site or other location where the disclosure is available; and“(ii) Make the disclosure available for at least 90 days …

“(d) Redelivery. When a disclosure provided by electronic communication is returned … undelivered, the [person] shall take reasonable steps to attempt redelivery using information in its files.

Consent to Receive Electronic Disclosures Both ESIGN and UETA are opt-in statutesBoth ESIGN and UETA are opt-in statutes

No party can be forced to conduct No party can be forced to conduct business electronically or to receive business electronically or to receive notices electronicallynotices electronically

Unlike ESIGN, UETA permits implied Unlike ESIGN, UETA permits implied consent. But UETA can not preempt ESIGN consent. But UETA can not preempt ESIGN with respect to disclosures to consumers. with respect to disclosures to consumers. ESIGN Sec. 101(c)(1).ESIGN Sec. 101(c)(1).

Strategies To Create Assent

Opportunity to Review Terms

1. Viewing of Terms before Assent

No assent allowed before Viewer has opportunity to review terms

Means of assent at end of terms, with scroll-through required

2. Assent before Access to Website or other Services

No access before assent given

No “deep-linking” to bypass Terms and Assent process

Opportunity to Review Terms

3. Ease of Viewing Terms

No pop-up windows that disappear

4. Continued Ability to View Terms

Must be able to print or download

Terms accessible elsewhere on site

Viewer must be able to reread the agreement if they want

Display of Terms

5. Format and Content Must comply with laws on notice, Must comply with laws on notice,

disclosure, conspicuousness, etc.disclosure, conspicuousness, etc. No fine printNo fine print

6. Consistency with Information Elsewhere

FAQ, etc should not contradictFAQ, etc should not contradict

Acceptance or Rejection of Terms

7. Choice Between Assent or Rejection

8. Clear Words of Assent or Rejection Clear: “I Agree” or “Yes” Unclear: “Continue” or “Next Page”

9. Clear Method of Assent or Rejection

Acceptance or Rejection of TermsAcceptance or Rejection of Terms

10. Consequences of Assent or Rejection

No access to site w/o assent Registration should stop

11. Notice of Consequences of Assent or Rejection

Example: “By clicking “Yes” below, you will be legally bound…”

Opportunity to Correct Errors

12. Correction Process

To detect and correct errors

Example:: Provide summary of online application or registration information

Keep Records to Prove Assent

13. Accurate Records of Terms and Process

Maintain records of version of Terms

Maintain records of assent process Need your webmaster to

understand the need to reproduce earlier versions of the website

Keep Records to Prove Assent

14. Retention and Enforceability User must be able to print or download

15. Accuracy and Accessibility after the Assent Process

If law requires records to be kept, then keep electronic records

Amendments to Terms

What is needed?

Need notice and assent againPop-up window upon log-inE-mail notice with delayed

effectiveness“Negative” assent commonly used

(i.e., if you do not object, then….”)

1st Example

2nd Example – top of page

2nd Example – bottom of page

3rd Example – top of page

3rd Example – bottom of page