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E-Sign Lessons Learned

Presented by:Molly StullBrode Consulting Services, Inc.Molly@brodeconsulting.comwww.brodeconsulting.com

June 24, 2021

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DisclaimerThis presentation is designed to provide accurate and authoritative informationin regard to the subject matter covered. The handouts, visuals, and verbalinformation provided are current as of the webinar date. However, due to anevolving regulatory environment, Brode Consulting Services, Inc. does notguarantee that this is the most-current information on this subject after thattime.

Slide content is provided with the understanding that the publisher is notrendering legal, accounting, or other professional services. Before relying on thematerial in any important matter, users should carefully evaluate its accuracy,currency, completeness, and relevance for their purposes, and should obtain anyappropriate professional advice. The content does not necessarily reflect theviews of the publisher or indicate a commitment to a particular course ofaction. Links to other websites are inserted for convenience and do notconstitute endorsement of material at those sites, or any associatedorganization, product, or service.

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Today’s PresenterMolly StullBrode Consulting Services, Inc.Molly Stull began her career as a teller while working on herundergraduate degree and has continued working in the financialindustry ever since. She has experienced the growth of a hometownbank, acquisitions of branches, mergers, charter changes, namechanges, etc. Molly has activated business resumption plans,performed secondary market quality control reviews, processedwires, filed SARs, and coordinated reviews with external auditorsand examiners. Her favorite role has always been educating staffand strongly believes that if staff understands the reason for aprocess, they will be more compelled to follow the procedures.Molly holds a Bachelor’s from the University of Akron and an MBAfrom Ashland University.

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Which Shop Are You?

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What Might We Find in Your Sent Email?

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How Are Loan Documents Providedto an Applicant?

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LoanDocs

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E-Sign Act Effective October 1, 2000Electronic Signature in Global and

National Commerce Act

Allows the use of electronic records to satisfy requirements for documents to be given in writing if consumer consents

Legalized Electronic Signatures

Legalized Electronic Documents

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E-Sign Relevant Documents The E-Sign Act becomes relevant:

When a federal law or regulation REQUIRESthe institution to send or deliver a document and

That law or regulation states that it must be provided IN WRITING.

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E-Sign Act – The Basics

It’s an Act – there is not an implementing regulation

No penalty or CMP

Beneficial – grants additional opportunities

Optional Use

Universal – not just applicable to FIs

15 U.S.C. §7001 et seq.

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15 U.S.C. 7001 Subchapter I – Electronic Records and Signatures

7001. General rule of validity 7002. Exemption to preemption 7003. Specific exceptions 7004. Applicability to Federal and State 7005. Studies 7006. Definitions

Subchapter II – Transferable Records Subchapter III – Promotion of International

E-Commerce10

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E-Sign Consumer Definition“Consumer” – Means an individual who obtains, through a transaction, products or services which are used primarily for

personal, family, or household purposes,

and also means the legal representative of such an individual.

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Other Definitions Electronic Record

Electronic Signature

Person (more than “breathing”) Individual, partnership, LLC, corporation

Record

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Remember to Consult the Regulations! CFPB’s Interactive Bureau Regulations Know what is required vs internal procedure

FDPA - SFHA Notice In a SFHA – Required by FDPA Not in a SFHA – FI’s procedure to sign

Privacy Notice Notice must be provided

Email with application Provide hard copy prior to consummation

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Reg B

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Commentary 1002.14(a)(1)-3 & -4

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Exam YOUR Institution’s Processes!

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E-SIGN Consent RequirementsNotice (Step 1)

a. Right or option to have the record provided on paper or in a non-electronic form;

b. Whether the consent applies only to the particular transaction that triggered the disclosure

c. Right to withdraw consent, including any associated conditions, consequences, and fees

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E-SIGN Consent RequirementsNotice (Step 1)

d. Procedures to withdraw consent; e. Procedures to update information needed to

contact the consumer electronically;

f. How the consumer may request a paper copy of an electronic record, and any fees, and

g. Hardware and software requirements for access to and retention of electronic records.

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Notice – Let’s Check… Option to receive a disclosure in paper form2. Your option to receive paper copies.

If we provide Electronic Records to you, and you want a paper copy, you may contact the appropriate customer service unit and request a paper version. You will find the appropriate contact information on the account statement or agreement for the ABC Financial Institution related to the Electronic Record. You may have to pay a fee for the paper copy unless charging a fee is prohibited by applicable law. Please refer to the applicable statement or agreement for any fee that may apply for paper copies.

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Notice – Let’s Check… What’s the consent apply to?3. Your consent covers all ABC Financial Institution ProductsYour consent covers all communications relating to any ABC Financial Institution Product. Your consent remains in effect until you give us notice that you are withdrawing it. From time to time, you may seek to obtain a new ABC Financial Institution Product from us. When you do, we may remind you that you have already given us your consent to use Electronic Records and signatures. If you decide not to use Electronic Records and signatures in connection with the new product or service, your decision does not mean you have withdrawn this consent for any other ABC Financial Institution Product.

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Notice – Let’s Check…

Right to Withdraw Consent4. You may withdraw your consent at any time. Consequences of withdrawing consent; How to give notice of withdrawal.You have the right to withdraw your consent at any time. Please be aware, however, that withdrawal of consent may result in the termination of: Your access to our Electronic Services, including online banking, and Your ability to use certain ABC Financial Services Products.Your withdrawal becomes effective after we have had a reasonable opportunity to act upon it.

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Notice – Let’s Check…Right to Withdraw Consent

If you are receiving online account statements, the termination will cause paper statements to be mailed to you via the U.S. Postal Service or other courier. Depending on the specific ABC Financial Services Product, if you withdraw consent we may charge higher or additional fees for that product or for services related to it. Please refer to the applicable agreement for any fee that may apply.To withdraw your consent: If you are enrolled in online banking, you must contact us at

1-800-999-8888. If you are not enrolled in online banking, you must contact us at

1-800-999-7777.

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Notice – Let’s Check… Updating Contact Information5. You must keep your email or electronic address current with us.You must promptly notify us of any change in your email or other electronic address. Sign on to ABC Online to update your contact information and change the email address on record for you. There may be other, special ABC Financial Products for which we provide separate instructions to update your email or other electronic address.

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Consumer Consent (Step 2)

Consumer must affirmatively consent:

Must be in a manner that reasonably demonstrates they can access information in the electronic form that will be used to providethe statements or disclosures you’re providing.

Often the most difficult part of complying with the Act!

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Affirmatively Consent It’s more than just signing the notice! File format of document (PDF, HTML) Systems utilized – Push vs Pull Email addresses – Bank employee Record retention Consent must be obtained prior

Bundle with LE end of third business day…

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E-Sign Act Considerations TRID – Delivery Points

LE: Must be delivered to either applicant

CD: Non-rescindable transaction: Must be delivered to either applicant

CD: Rescindable transaction: Must be delivered to all consumers that have the right to rescind

On title but residence is not primary dwelling –No rescission rights. No obligation to provide a CD.

On title, residence is primary dwelling – Rescission is applicable. Must provide a CD.

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Right of Rescission SummaryEach Person

One copy of the Closing Disclosure

Two copies of the RoR notice (one copy if delivered electronically)

Timing requirements for delivery of the CD apply. Three business days prior to consummation

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Making Sure Delivery Meets “Separately” Requirement

“In rescindable transactions, the disclosures required by § 1026.19(f) must be given separately to each consumer who has the right to rescind under § 1026.23.” 1026.17(d)-2

1026.19(f) Mortgage loans – final disclosures (CD) 1026.23: Right of rescission

How does your institution handle this? Electronic Delivery – Non-borrowing spouse

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Other Considerations

Demonstrating consent on institution-owned device

iPhone, iPad during the new account process

At application: Program disclosures, EFT, Funds Availability

Must we monitor reading the document?

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TISA 1030.3(a) General Disclosure Requirements

Depository institutions shall make the disclosures required by §§ 1030.4 through 1030.6 of this part, as applicable, clearly and conspicuously, in writing, and in a form the consumer may keep.

1030.4 Account disclosures 1030.5 Subsequent disclosures 1030.6 Periodic statement disclosures 30

The disclosures required by this part may be provided to the consumer in electronic form, subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.).

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TISA 1030.3(a) General Disclosure Requirements

The disclosures required by §§ 1030.4(a)(2) and 1030.8 may be provided to the consumer in electronic form without regard to the consumer consent or other provisions of the E-Sign Act in the circumstances set forth in those sections.

1030.4(a)(2) Account disclosures: Delivery of account disclosures, Requests

1030.8 Advertising

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EFT 1005.4General Disclosure Requirements

(a)(1) Form of disclosures. Disclosures required under this part shall be clear and readily understandable, in writing, and in a form the consumer may keep, except as otherwise provided in this part. The disclosures required by this part may be provided to the consumer in electronic form, subject to compliance with the consumer-consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.).

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EFT 1005.4General Disclosure Requirements

(c)(2) Multiple account holders. For joint accounts held by two or more consumers, a financial institution need provide only one set of the required disclosures and may provide them to any of the account holders.

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Regulation CC 229.15 General Disclosure Requirements

(a) Form of disclosures. A bank shall make the disclosures required by this subpart clearly and conspicuously in writing.

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No Fancy E-Sign System…Electronic Delivery is Still an Option

1. Notice

2. Email an attachment in same format

3. Special code in the attachment

4. Affirmatively consent

5. Include the code in the return email

6. Retain the email correspondence

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Changes to Hardware/Software“After Consent” Disclosure

If you make change to your hardware or software requirements, that could prevent a consumer from accessing/retaining their electronic records…

1. Provide consumer with revised requirements;2. Provide right to withdraw consent without

consequence; and3. Re-obtain affirmative consent

*Material risk that consumer will not be able to access or retain records.

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Uniform Electronic Transaction Act (UETA)

Ensures that electronic signatures, electronic records, and contracts based or memorialized in electronic formats would not be rejected merely because of their electronic nature

Transaction: an action or set of actions occurring between two or more persons relating to the conduct of business, commercial or governmental affairs

48 States – Illinois (introduced in 2021) and New York

Parties have agreed to conduct transactions electronically

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Record Retention

Maintain electronic records that are accessible and can be reproduced for the period required by law.

Satisfy requirement to provide electronic disclosures in a form the consumer can retain if the disclosures are provided in a standard electronic format that can be downloaded and saved or printed on a typical home personal computer.

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What ExaminersWill Be Looking For

Determine if and to what extent your institution provides disclosures and notices subject to the E-Sign Act.

Determine if your institution has established procedures to ensure compliance with the provisions of the Act.

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What ExaminersWill Do

Determine if consumers were provided with the appropriate notice before consenting.

Determine that the consumer provides/confirms consent electronically in a manner that demonstrates they can access the electronic records subject to the consent.

Verify you provided the consumer with a statement of changes, and obtained a new affirmative consent if you made changes to the hardware or software requirements needed to access or retain the electronic records.

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What Examiners Will Do

Determine if your institution maintains a single “authoritative” copy of any transferable record relating to a loan secured by real property.

Determine whether your institution maintains accurate electronic records, and that they remain accessible to all persons who are legally entitled to access for the period required by law in a form that is capable of being accurately reproduced for later reference.

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Consequences Regulation Z

Rescission period open for three years

All interest and fees must be refunded!

FDPA $2,000 per violation for a pattern or practice

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E-SIGN Act Exceptions15 U.S.C. §7003(b)(2(B)

Does not apply to the following notices involving an individual’s primary residence: notice of default, acceleration, repossession, foreclosure, eviction, or the right to cure for a mortgage or lease

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Best Practices

Involve compliance personnel when relying on electronic delivery of products and services.

Establish a regular audit or review that independently identifies institution products and services (e.g., deposit accounts), activities, and information consumers can access electronically.

Focus on how changes in vendors or other third parties impact E-Sign compliance. Vendors often assist institutions in complying with the Act.

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Six-Step Consumer Consent Process1. Availability of Paper Delivery or Paper Copies

2. Consent Choices

3. Consumer Actions

4. Hardware/Software Requirements

5. Affirmatively Consent

6. After Consent Disclosure

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Your Action Steps

1. Determine what is being sent electronically? Documents, disclosures, notices

2. What Reg/Act governs this document?

3. Is the document required to be delivered in writing?

4. Is the document only being delivered electronically?

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Notice Checklist

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Toolkit Electronic Notice Checklist Page 18

Electronic Notice Disclosure Page 19

Mortgage Loan Flow Chart Page 21

Resources Page 22

Delivery Requirement Citations Page 23

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Delivery Requirements Citations

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Delivery Requirements Citations

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Thank You!

Have a Great Day!

If you have any further questions, please email

molly@brodeconsulting.com

www.brodeconsulting.com