31 January 2022 • 13 minute read

Digital Transformation: eSignature and ePayment News and Trends - 31 January 2022

Achieving Digital Transformation and Securing Digital Assets

Editors:Margo Tank Elizabeth (Liz) Caires

A fact of business today is that customers – both consumers and other businesses – and employees expect to transact digitally. To remain competitive, companies find themselves increasing their efforts to digitally transform their businesses.

Successfully implementing this transformation requires careful planning to ensure regulatory compliance, a smooth integration with existing business technology and a positive customer experience.

Each issue will feature in-depth insight on a timely and important current topic.

In this issue, as we look ahead to 2022, we highlight our past Insights pieces for 2021. This issue also includes reports on other recently enacted federal and state laws, federal and state regulatory activities, fresh judicial precedent and other important news.

For related information regarding blockchain and digital assets, please see our monthly bulletin Blockchain and Digital Assets News and Trends.

INSIGHT

2021 – Year in review

This last year saw numerous changes and advancements on the regulatory front related to digital transformation. Below are links to our Insights articles addressing these developments:

REGULATORY DEVELOPMENTS

FEDERAL

Virtual currency

Acting Comptroller speaks on the future of crypto-assets and regulation: On January 13, 2022, before the BritishAmerican Business Transatlantic Finance Forum, Michael Hsu, the acting Comptroller of the Office of the Comptroller of the Currency (OCC), spoke on crypto-assets and regulation. Hsu began by highlighting how crypto has gone mainstream – from credit card issuers offering bitcoin rewards programs to large corporations accepting cryptocurrency payments. Of particular note, the acting Comptroller pointed to a study indicating that the underbanked are more involved in cryptocurrency than the fully banked.

Hsu directed the majority of his remarks towards stablecoins. He noted that stablecoins present unique risks, especially if a “run” were to occur, but added that there is an effective tool to mitigate the risk – bank regulation. He stated that regulating stablecoin issuers as banks may enable more crypto innovation. The acting Comptroller also advocated for a coordinated and collaborative regulatory approach, highlighting how large crypto intermediaries act globally, have tens of millions of users and handle hundreds of billions of dollars of transactions every month.

Federal Reserve publishes paper on the pros and cons of a US central bank digital currency: In January 2022, the Board of Governors of the Federal Reserve System published a paper titled “Money and Payments: The U.S. Dollar in the Age of Digital Transformation.” The paper examines the pros and cons of a potential US central bank digital currency (CBDC). The paper assesses the current domestic payments system and discusses new digital payments and assets that have recently emerged, such as stablecoins and other cryptocurrencies. To fully assess a potential CBDC, the Federal Reserve asks the public 20 questions; comments are accepted for 120 days.

Relatedly, the House Committee on Financial Services announced that, on February 8, 2022 at 10 am EST, the full Committee will convene for a hearing entitled “Digital Assets and the Future of Finance: The President’s Working Group on Financial Markets’ Report on Stablecoins.” All hearings are livestreamed at https://financialservices.house.gov/live/. For our prior coverage of The President’s Working Group on Financial Markets’ Report on Stablecoins, please visit here.

Digital identity

FDIC and FinCEN launch digital identity sprint: On January 11, 2022, the Federal Deposit Insurance Corporation (FDIC) and the Financial Crimes Enforcement Network (FinCEN) announced a Tech Sprint, which would develop solutions for financial institutions and regulators to measure the effectiveness of digital identity proofing. The FDIC and FinCEN ask Tech Sprint participants to answer the following question: “What is a scalable, cost-efficient, risk-based solution to measure the effectiveness of digital identity proofing to ensure that individuals who remotely (ie, not in person) present themselves for financial activities are who they claim to be?”

Remote online notarization

Freddie Mac updates guidance on remote online notarization (RON) video storage. On December 1, 2021, Freddie Mac issued a bulletin updating section 1401.16 of its mortgage selling guide effective December 8, 2021 to require “[c]urrent Servicers (instead of Sellers) to obtain the recording of the [remote online] notarial act upon request” and to require “RON technology providers to make arrangements with notaries to provide access [to the recordings] to Sellers and Servicers.” The stated intent behind the update is to “make it easier for current Servicers to obtain the recording, if necessary, for enforcement purposes or upon Freddie Mac request.”

State

Electronic records and signatures

New York enacts law allowing for electronic delivery of property/casualty insurance notices: On December 22, 2021, the New York governor signed into law SB 653, which authorizes the electronic delivery of insurance notices with the recipient’s consent and the posting of insurance policies on the internet provided certain conditions are met.

Remote online notarization

New York adopts RON. On December 22, 2021, the New York Governor signed SB1780 to provide for in-person electronic (IPEN) and RON in the state. The law will become effective 180 days after enactment, or June 20, 2022. Registration is required for state notaries to perform either IPEN or RON in the state, and the Secretary of State is required to adopt rules and regulations supporting RON and IPEN.

CASE LAW

FEDERAL

Electronic signature and contract formation

Court concludes valid agreement to arbitrate exists:

In McCain v. Tier 1 Completions Solutions, Inc., 2021 WL 5632774 (Dec. 1, 2021), the defendant asserted that the plaintiff had electronically signed an agreement to arbitrate disputes as part of the defendant’s employment onboarding process. The defendant produced an audit trail and evidence concerning authentication of the plaintiff as part of the online signing process. The plaintiff admitted signing various employment documents electronically, but claimed he had no emails related to the alleged arbitration agreement. The court stated that the plaintiff’s lack of any emails regarding his electronically signed arbitration agreement was not a sufficient basis from which to challenge the existence or execution of the agreement. The plaintiff did not deny that the agreement bore his electronic signature, and the evidence on record showed that the plaintiff opened and electronically signed the arbitration agreement before sending it back to the defendant.
In Holman v. Bath & Body Works, LLC, 2021 WL 5826468 (E.D. Cal. Dec. 12, 2021), the court found that the plaintiff validly signed an arbitration agreement electronically because (1) an electronic signature is a valid means of assenting to an arbitration agreement and (2) the records submitted by the defendant were valid to demonstrate that the plaintiff signed the arbitration agreement. Further, while the defendant did not sign the arbitration agreement, the court found that the lack of countersigning an individual contract is not an obstacle to finding a valid and enforceable agreement.

STATE

Electronic signature and contract formation

Defendant unable to enforce arbitration agreement because it did not sufficiently authenticate signer: In Moncibaez v. Stericycle, Inc., 2021 WL 5822174 (Cal. Ct. App. 2^nd. Dist. Dec. 8, 2021), the court affirmed the lower court’s holding that the defendant did not demonstrate an enforceable arbitration agreement. Specifically, the court found that the defendant failed to sufficiently authenticate the signer as required under California’s Uniform Electronic Transactions Act. For its reasoning, the court stated that the evidence showed that the plaintiff was not the only person who had access to and could have signed the arbitration agreement; the defendant produced a log showing that its employee accessed the arbitration agreement both before and after it showed the plaintiff signing it. The defendant argued that prospective employees and employees are prompted to create a unique password, but the court stated that the defendant did not state that a unique username and password were the only means to access the document such that it would demonstrate the signature was solely the act of the plaintiff. Further, the plaintiff stated that the signature on the arbitration agreement was not the name he typically used and that he did not recall signing the agreement or ever using that name for any documentation provided by the defendant. Taken together, the court concluded that substantial evidence supports the lower court’s finding that the defendant failed to authenticate the electronic signature as the act of the plaintiff.

Read this next

Embracing digital evolution: Our new business report

Interview with Margo H.K. Tank by Börsen-Zeitungon cryptocurrency regulation.

UPCOMING EVENTS

David Whitaker will be speaking at a Strafford Webinar on “E-Signatures and Electronic Documentation in Real Estate Finance” on Tuesday, February 1, 2022. More information is available at the Strafford website.

RECENT EVENTS

DLA Piper lawyers ranked in Chambers FinTech 2022. DLA Piper is pleased to announce that the editors of this newsletter, Margo Tank and David Whitaker, have been ranked by Chamber & Partners in the area of USA FinTech Legal: Data Protection and Cyber Security. Margo was also ranked in the area of FinTech Legal: Blockchain & Cryptocurrencies. In total, the firm received 19 firm rankings and 14 individual lawyer rankings in the Chambers FinTech 2022 guide.

The Financial Times has ranked DLA Piper second on its lists of Most Innovative Law Firms and Most Digital Law Firms in the FT North America Innovative Lawyers 2020 report. Particularly noted by The Financial Times was our pro bono legal work on behalf of the UN’s World Food Programme – the authors of eSignature and ePayment News and Trends assisted in that work.

RECENT PUBLICATIONS

The Law of Electronic Signatures, 2020 - 2021 Edition (Thomson Reuters) is an essential guide to electronic signatures and records laws, including the context in which the laws were adopted and the ways in which the authors believe the drafters intended them to be interpreted. The publication is prepared by authors, including Margo Tank and David Whitaker, with more than 30 years combined experience that includes involvement with the drafting and passage of Electronic Signatures in Global and National Commerce Act (ESIGN), the preparation of the Uniform Electronic Transactions Act (UETA), the creation of the Standards and Procedures for electronic Records and Signatures (SPeRS™) and serving as counsel to the Electronic Signatures and Records Association. The insights they provide will be relevant to anyone seeking to understand the impact of, and the liability associated with, using electronic signatures and electronic records.

These insights include:

Details on the legal requirements for using electronic signatures and records, including delivery, presentation, signing and record retention
Comprehensive tables itemizing the state variations to the uniform UETA language
Special considerations for using electronic signatures and records in connection with emerging and evolving technology
Using electronic records and signatures in specialized transactions and documents, such as securities, chattel paper and mortgages
Analysis of the interplay between ESIGN, UETA and many other key laws and regulations
Identification and summaries of recent legal developments and court cases impacting electronic signatures and records

The MBA Compliance Essentials Remote Online Notarization State Surveys, developed byDLA Piper, provides a comprehensive look at RON requirements in each state that has enacted RON legislation. These fully editable surveys are organized by category of requirements, including registration, technology, seal and signature, certificates of RON acts, journal, authentication, session, recording and additional requirements. Companies can purchase the full package which includes surveys for all states that have enacted RON legislation along with a matrix summarizing state requirements, or companies can purchase information about individual states as needed. Read more.

For more information

Our Global Tax Reform hub looks at the latest developments regarding US tax legislation.

In case you missed it

Read the latest issue of our bulletin Bank Regulatory News and Trends

Read the latest issue of our bulletin Consumer Finance Regulatory News and Trends

Contacts

Learn more about our eSignatures and ePayments practice by contacting:

Margo H.K. Tank
David Whitaker