House Rejects Electronic Signatures Bill

(November 2, 1999) The House of Representatives narrowly rejected HR 1714, a bill providing for the acceptance of electronic signatures in interstate commerce, by a vote of 234 to 122. Since it was considered under a suspension of the rules, a 2/3 majority was required for passage.

HR 1714, the Electronic Signatures in Global and National Commerce (E-SIGN) Act, is sponsored by Rep. Tom Bliley (R-VA), the Chairman of the House Commerce Committee.

The bill has gone through many changes since it was first introduced in May. It covers most types of private contracts which affect interstate commerce. The key language provides that "the legal effect, validity, or enforceability of such contract, agreement, or record shall not be denied (1) on the ground that the contract, agreement, or record is not in writing if the contract, agreement, or record is an electronic record; or (2) on the ground that the contract, agreement, or record is not signed or is not affirmed by a signature if the contract, agreement, or record is signed or affirmed by an electronic signature." It is technology neutral.

Rep. Anna Eshoo (D-CA) introduced another electronic signatures bill, HR 1320. The two bills differed of the subject of preemption of state laws affecting electronic signatures. The Bliley bill strictly preempted state laws; the Eshoo bill did not. However, the preemption language of HR 1714 was softened by the Commerce Committee, and Rep. Eshoo then supported it. This bill was adopted by the Telecom Subcommittee in July, and by the full Committee in August.

HR 1714 also has a separate title dealing with electronic contracts used in securities trading, which was marked up by Rep. Mike Oxley's (R-OH) Finance Subcommittee. It has not been the subject of public opposition.

HR 1714 ran into trouble in the Judiciary Committee. First, it was amended in the Courts and Intellectual Property Subcommittee, which is chaired by Rep. Howard Coble (R-NC). The Coble version of the bill excluded contracts to which the federal government is a party, and deleted a provision giving the Commerce Department authority to enjoin state statutes not in conformity with the federal law.

Last month, the full Judiciary Committee rejected the Coble-Bliley version of the bill. Instead, the Committee reported out a substitute bill drafted by Rep. Howard Berman (D-CA) which offered the states wide latitude to adopt their own laws affecting electronic signatures. Supporters of the Berman version argued that this would allow state legislatures to protect consumer rights.

In the last few weeks Rep. Bliley negotiated with opponents of the bill, including Rep. Ed Markey (D-MA) and Rep. John Dingell (D-MI), regarding further modifications in the bill to protect consumer rights. The resulting version of HR 1714 was the subject of the vote on November 1.

This version of the bill not allow states to adopt their own consumer protection provisions. Rather, it included a number of new consumer protection provisions in the federal standard.

This version won over the support of some former opponents of the bill. For example, Rep. Zoe Lofgren (D-CA) and Rep. Lindsey Graham (R-SC), who had voted for the Berman bill in the House Judiciary Committee, voted for the Bliley bill in the full House.

However, the Clinton administration announced its opposition to the bill, and Rep. Markey and Rep. Dingell continued in their opposition too. Meanwhile, Rep. J.C. Watts (R-OK), Chairman of the House Republican Conference, circulated a dear colleague letter urging support for the bill.

Floor Debate on HR 1714

The House debated HR 1714 on Monday, November 1, before voting. Rep. Bliley led the supporters of the bill, while Rep. Markey led the opponents.

Rep. Bliley stated that "The purpose of this legislation is to provide a uniform nationwide standard for electronic signatures and electronic records. It creates a minimum Federal standard to promote interstate commerce, but E-SIGN recognizes the efforts of States to enact their own uniform laws."

"The bill we have before us today is the product of extensive research, careful examination of the issues, committee hearings and mark-ups, and extensive negotiations with our colleagues across the aisle and many other interested parties."

Rep. Oxley spoke regarding the title affecting securities trading. "One goal of this legislation is to allow customers to open accounts on line without mandating a physical signature on a brokerage agreement and mailing it back to the broker. Title III of this legislation modernizes securities laws by providing that requirements for a writing can be satisfied by an electronic signature with just a click of a button."

Rep Bruce Vento (D-MN) spoke against the bill. He argued that it was harmful to consumer rights. "In fact, this legislation would undermine some of the fundamental consumer laws that we have that relate to financial institutions and agreements, such as truth in lending, so an individual knows what his proper amount of interest is, and he would receive detailed information. They could opt for that electronically and, thereafter, that would be sufficient. Provided that that consumer did not make any other choice under this bill, they would never receive this as a paper document, in fact, it would only be an electronic record."

Rep. Vento continued: "There are all sorts of problems that could go down. The assumption here is that someone is going to have a computer and be on the Internet forever; that the format is not going to change; that the printer works; that there is paper in the printer. There are many other assumptions that simply do not fit in terms of what the consequence would be with regards to consumers."

Rep. Tom Davis (R-VA), one of the original cosponsors of the bill, rebutted Rep. Vento's comments. "I have heard that this preempts existing consumer protection laws; I have heard that this legislation will force consumers into electronic transactions; I have heard this will discriminate against consumers that do not have computer access. These claims are false."

"First, consumers are absolutely free to choose or not choose to enter into electronic transactions. This bill clearly states that nothing requires any party to use or accept electronic records or electronic signatures. This bill simply offers consumers the option, by mutual consent, to use electronic transactions should both parties determine that to be their preference."

"If a consumer does choose to conduct an on-line transaction, that consumer is protected by the underlying Federal or State laws governing that transaction. If a State law requires that a notice or disclosure be made in writing, then those traditional writings must continue to be delivered from the consumer. Nothing in this bill will nullify such existing State consumer protection laws," said Rep. Davis.

Rep. Markey spoke in opposition, and submitted for the Congressional Record a statement from the Clinton/Gore administration opposing the bill. Rep. Markey concluded: "I am afraid that the administration is today indicating that they would be likely not to support, even to veto, this legislation in its present form."

Rep. Anna Eshoo (D-CA), Rep. James Moran (D-VA), and Rep. Chris Cannon (R-UT) also spoke in favor of the bill.

Rep. Dingell and Rep. John Conyers (D-MI) also spoke in opposition to the bill.