U.S. House Passes E-SIGN Act

The U.S. House of Representatives overwhelmingly approved a bill Wednesday that would make most electronic signatures over the Internet as legal and binding as written signatures on paper.

The E-SIGN proposal was passed by a 426-4 vote despite concern from some groups that it will compromise protection for consumers making electronic transactions.

“Our signature is our word,” said Rep. Gene Green (D-Texas) whose committee guided the bill through the House. “It binds all agreements. The signatures of our forefathers freed our country. Today, in many respects, we are going to free the American consumer.”

The proposal must still be approved by the Senate, which worked closely with the House to develop the compromise legislation. President Clinton has indicated that he will sign the bill into law.

Signing on the Digital Line

Advocates argue that digital signatures will save consumers time and money. “I believe we will see enormous savings in businesses, greater efficiencies in the market and faster paperless transactions that will translate into lower costs for consumers,” Rep. Tom Davis (R-Virginia) said.

Most U.S. states already have some sort of digital signature law, but the federal statute, also known as the Millennium Digital Commerce Act, establishes a uniform, national standard.

The new legislation is also more comprehensive than most state laws, covering a wide range of electronic transactions involving businesses, consumers, private enterprises and government organizations.

Business contracts, legal documents and certain kinds of loans will be affected, but the statute does not cover court orders, wills and foreclosures.

Compromise Crafted

The compromise bill was a long time coming, because the Clinton administration, Democrats and some consumer groups felt that some sections might weaken security for consumers, while many Republicans felt e-commerce would be burdened by cumbersome provisions involving consumer consent.

The goal of all concerned was to craft legislation that would give electronic signatures the same force of law as traditional paper agreements and handwritten signatures. Digital signature technology uses encryption to scramble information so that only the parties legitimately involved in a contract can read it.

Consumer concerns have been somewhat assuaged by strong assurances from the business community touting digital signatures as even more secure than written ones. The legislation also contains a provision ensuring that private citizens who do not have Internet access will receive important documentation by other means.

“Electronic signatures and records will help grow the digital economy by giving American consumers greater confidence in their online business transactions,” said Rep Tom Bliley (R-Virginia). “This is one of the most important steps Congress can take to help foster the growth of the digital economy.”