An elderly woman is visited at home by a window salesman who talks her into buying 10 windows for $10,000. She signs a number of pieces of paper, including the sales contract, the financing agreement, and a form on which she consents to receive the contract and all notices relating to the sale over the Internet at an e-mail address established for her by the window salesman. She does not own a computer and has no knowledge of how to use one. The window salesman does not provide the woman with any paper copies of these documents.
A savvy young man walks into a car dealership. After driving a number of cars, an agreement is reached regarding the purchase and financing of a particular model. The young man sits down to sign the papers. Among the contract and disclosures, he finds a consent form under which he would agree to receive his copies of the papers he is currently signing, and all other notices and disclosures relating to the transaction (such as the warranty information and recall notices), at an e-mail address. He objects to this. The salesman points out that if does not agree to receive everything electronically, the price for the car will be increased by $1,000.
A professor at a major university shops the Web for the best price for a personal computer. He finds just what he wants and enters into a contract to purchase the computer and make 12 monthly payments of $150 each, for a total price of $1,800. He agrees to receive the contract and all other notices and disclosures electronically. His copy of the contract is sent to him in Word Perfect 6.0 format. After considerable difficulty, he is able to open and print the contract, but in the process he has to save it as a Microsoft Word file. The computer arrives at his home, and it is not the one he ordered and not the one referred to in his contract. He contacts the computer dealer and is told that he received what their version of the contract indicates. He contacts an attorney for assistance, but is told that he does not have a copy of the contract that he can use to prove its terms in court, so he is stuck. The terms in the contract he was sent do not match the terms on the Web page.
All of these scenarios are currently illegal, but would be made legal under H.R. 1714 the Third Millennium Digital Commerce Act that passed in the House of Representatives two weeks ago. Under the guise of facilitating electronic commerce, the House passed a bill that would eviscerate numerous state and federal consumer protection laws. Unfortunately the financial services industry used this bill as a way to avoid providing required and important information to consumers. If this bill becomes law, states would be prohibited from passing laws to protect their own citizens. Despite the strong warnings from the Democratic leadership that this bill hurts consumers and is not the way to assist e-commerce, as well as the threat of a veto from the president, the bill passed overwhelmingly.
A much more judicious bill on the same subject also passed the Senate last week. The Senate version, S761, only allows the practice of consenting parties to enter into contracts using electronic records and electronic signatures. States are permitted to protect their consumers as they deem fit.
The Federal Trade Commission and numerous consumer groups have raised objections to the overreaching provisions of the House proposal. The consumer groups have proposed the following basic standards for a federal law governing electronic commerce:
1. Electronic disclosures should only be permitted when the transaction is initiated and consummated electronically and not in person.
2. When signatures are required, the electronic signature technologies used must be reasonable, tied to the consumer’s actual intent to sign the document, and only be attached to documents that are unalterable after the signature is attached.
3. The consumer should be given the specific and optional opportunity to consent or to refuse to accept disclosures electronically without surcharges for rejecting the electronic notices.
4. If the consumer is wrong about the capacity of the computer to print and/or retain the electronic record of the disclosures, the consumer must be able to request paper copies to be provided at reasonable and bona fide cost, and in a reasonable and timely manner.
5. The disclosures must actually be delivered to the consumer’s e-mail address with a manual reply return requested, or they must be retained on the seller’s Web site for the duration of the transaction.
6. When disclosures are provided to consumers through a seller’s or creditor’s Web site, they must be retained for the duration of the contract.
7. The electronic record must be accessible and retainable by the consumer and must be provided in a format that prevents alteration after it is sent, so that it can be used to prove the terms of the record in a court of law.
8. There should be a separate consent for each type of disclosure made after consummation. The consumer’s failure to respond to the consent request should trigger paper disclosures before the failure to respond to an electronic disclosure triggers default.