Clinton/Gore Administration Statement.
Re: Opposition to HR 1714.
Submitted for the Congressional Record by Rep. Ed Markey (D-MA) during the floor debate on HR 1714 on November 1, 1999.
Source: Congressional Record, November 1, 1999.

H.R. 1714: Electronic Signatures in Global and National Commerce Act

The Administration strongly opposes House passage of the revised version of H.R. 1714, the `Electronic Signatures in Global and National Commerce Act.' The Administration believes that electronic commerce can provide substantial benefits to consumers, and seeks to foster the expansion of this medium. Secure electronic signatures can play an important role in this area, and the Administration supports their development and dissemination. However, the Administration also believes strongly that individuals should have no fewer consumer protections in the on-line world than they do in other forms of commerce. That disparity could undermine consumer confidence in electronic commerce, and impede the growth of this important new medium of trade. While some improvements have been made, H.R. 1714 still goes well beyond what is necessary to facilitate electronic commerce, and unnecessarily deprives consumers of important protections.

The Administration believes that Federal legislation is appropriate to ensure the validity of electronic agreements entered into by private parties under State law before the States have an opportunity to enact the Uniform Transactions Act (UETA). We therefore support the bill's provisions affirming the legal validity of contracts that are memorialized and signed in electronic form.

The Administration also believes, as noted, that consumers must be granted the same protections on-line that they currently receive off-line under existing laws and regulations. Unfortunately, many Americans today do not enjoy reliable and regular access to the Internet. To ensure that an electronic disclosure will have the same impact upon consumers on-line as paper disclosure has now, regulators must have the authority to make sure that electronic notices and disclosures will actually reach and be understood and retained by consumers. H.R. 1714 also would allow businesses to condition credit or other services on a consumers' consent to notices or disclosures--even when the consumer is incapable of receiving or retaining them. The Administration strongly objects to this bill on several grounds.

First, the bill purports to protect consumers by requiring them to `separately and affirmatively' consent to the use of electronic records. Unfortunately, this provision requires just an additional paragraph of small print in the form contract prepared by a business. The notice to the consumer need not be conspicuous, the consumer need not be told of his or her right to obtain information in the form required by law, and the consumer need not be told which specific records would be affected. More fundamentally, these current law notice and disclosure requirements were created to protect vulnerable consumers allowing businesses to redefine the protections based on `consent'--something that businesses may not do with respect to paper transactions--is thus an open invitation to consumer deception on a broad scale.

Second, the scope of the bill's preemption is unjustifiably broad. Neither the States nor Federal regulators will have any ability to eliminate the abuses that may occur when electronic records are used. With respect to Federal regulators, the bill by its terms eliminates all such authority. With respect to the States, the bill's grant of authority is illusory because it prohibits (in section 102(b)(4)) any State action inconsistent with the bill's provisions, leaving the States powerless to curb any abuse that the bill itself fails to prevent.

Third, the bill overrides all Federal and State laws or regulations concerning notices necessary for the protection of safety, shelter or health (there is a narrow exception for notices relating to the termination of utility services, eviction or foreclosure of a primary residence, or the termination of health or life insurance). Although the States are permitted to reinstate such regulations, the bill creates a gap in protection--in the critical area of safety and health--for the several years that inevitably will elapse before these rules can be reenacted. Federal agencies have no power to reinstate any Federal notice and disclosure requirements needed to protect health, safety, or shelter.

Fourth, the bill recognizes the importance of preserving Federal regulations by requiring certain entities (including banks and other financial institutions) to file or maintain records in a specified form, but fails to ensure that regulators' safety and soundness authority will continue to allow the establishment of minimum standards for computer security and interoperability. The bill also preempts all State laws and regulations regarding the maintenance of records. As a result, entities regulated under state law, such as insurance companies, will be able to decide for themselves how to maintain information, thereby undermining regulators' ability to ensure the soundness of these institutions and to detect violations of the laws and regulations governing them.

Fifth, the bill contains a provision (adding section 3(h)(1) to the Securities Exchange Act of 1934) that appears to preempt State and Federal record and signature requirements, including those applicable to forms required under Federal and State tax laws and regulatory statutes such as ERISA (existing Federal securities law requirements are exempted from this broad waiver). This means that the securities industry would have the right to force Federal and State agencies to accept electronically signed documents immediately, even if, for example, the agency has not yet implemented an electronic filing system. Title I of H.R. 1714 appears to preserve filing requirements in Federal regulations (but not statutes) and in State laws, and we see no justification for establishing a special preferential rule for the securities industry.

Finally, the bill contains other technical and drafting flaws likely to create the very confusion that it is supposed to eliminate.