Electronic signatures have become the standard for payment authorizations and debt contracts. Each signed debit or credit purchase signifies a signed contract by the customer, who does not actively think about the contract and obligation for repayment. It is just automatic. So what impact could this have on a collection agency? Quite a bit. Collecting on a debt could involve an electronic funds transfer (EFT) and the consumer could be expecting to use an electronic signature for the transaction. This means that Regulation E (Reg E) on electronic funds transfers is applicable.
Consumer Financial Protection Bureau Reg E Compliance
Due to the increased popularity of electronic signatures, the Consumer Financial Protection Bureau (CFPB) issued a bulletin in November 2015 clarifying steps required to remain compliant with Reg E statutes concerning debt collection activities. Agencies can use this to capitalize on customers’ comfort levels with eSignatures while remaining compliant with Reg E.
The Electronic Fund Transfer Act (EFTA) prescribes certain rules for preauthorized Electronic Fund Transfers (EFTs) from consumer accounts. Under the EFTA and Reg E, the consumer must authorize all preauthorized EFTs. Regulation E requires that consumers authorize all preauthorized EFTs only by a writing that is signed or similarly authenticated by the consumer.
The E-Sign Act provides that electronic records and electronic signatures have the same validity as paper documents and handwritten signatures. If the EFTA calls for a writing to be made in connection with a transaction, the writing can be satisfied by an electronic record. If the EFTA requires a writing to be “signed or similarly authenticated,” the requirement can be satisfied through an electronic signature.
Under the EFTA and Regulation E, then, companies can obtain the required consumer authorizations for preauthorized EFTs in several ways, including in paper form or electronically. The CFPB explained that Regulation E states that the rule “permits signed, written authorizations to be provided electronically” and specifies that the “writing and signature requirements . . . are satisfied by complying with the Electronic Signatures in Global and National Commerce Act (E-SIGN Act) which defines electronic records and electronic signatures.”