Digital signature act passed with 426-4 majority

Published June 15th, 2000 - 02:00 GMT

After years of controversy on government key escrow backed by demonizing media reports with images of "big brother" like watchful activity, along with state-side laws to fill the void, the US congress has realized the importance of digital signatures as a means to nurturing e-commerce and passed a law to that end. 

The E-SIGN Act passed Wednesday by 426-4 votes and could come up in the Senate on Friday. It is strongly backed by US President Bill Clinton, who said in a written statement that "it will encourage the information technology revolution that has helped lower inflation, raise productivity and spur new research and development."  

If signed by Clinton, the legislation would take effect Oct. 1 and as of March 1, 2001, companies could begin the electronic retention of legal records such as mortgages and financial securities.  

The legislation makes one's name typed into a computer as legally binding as that scribbled on paper. The E-bill would allow businesses to close deals without going to the office and consumers would be able to buy a car, apply for a mortgages and loans without ever having to take out a pen. 

The bill would set national legal standards for electronic deal closing, which is central to e-commerce -- expected to triple from $500 billion last year to some $1.6 trillion by 2003.  

The bill, meanwhile, does not spell out exactly how the online transactions will take place. The two involved parties can reach agreement on a contract format or they can go through a growing number of third parties offering software verifying the authenticity of electronic signatures.  

The final version, however, requires that consumers agree to electronic transactions and consent to receiving records and documents electronically rather than with paper. Businesses must confirm that customers have the necessary hardware and software to receive electronic documents.  

Notices of termination, such as health insurance lapses, electricity cut-offs or evictions, would still have to be delivered by paper.  

A tip sheet on electronic signatures put out by Consumers Union advised customers to be sure their hardware and software is compatible with that of the business, to keep backup paper copies of electronic documents, to close unused e-mail accounts and to refrain from giving out e-mail addresses if the person doesn't want to receive e-mail notices from a business. 




If signed by Clinton, the bill would narrow the last gap in electronic transactions, namely, closing the deal. Commerce Committee Chairman Thomas Bliley, a Republican representative from Virginia and chief sponsor of the bill, said a consumer can already apply for a mortgage or get a quote on a life insurance policy over the Internet, "but when it comes time to close the deal, a consumer must physically sign the contract. E-SIGN will allow the entire transaction to be done electronically."  

So far, attempts to legislate e-signatures have gone through on the state level only, with firms like ID Certify and Verisign, based in Seattle, offering their services to financial institutions only so far. 

Firms like ID Certify and Verisign are based on what are known as third party escrow, whereby the firm issues a digital certificate to identify subscribers who store their public keys on the firms' servers. Applying for a digital ID can cost upwards of $15 in annual fees, as well as insurance and charges for transactions that require verification, which can reach $25 or more per transaction. 

As such, if passed on the Federal level, the bill would take digital signature related legislation away from state-side legislation. 

Experts, meanwhile, are certain that digital verification is going to be much more secure than human scrawls on paper. Encryption not only guarantees privacy, but it also ensures that a document has not been doctored -- change even one comma, and the transaction will be refused. 

The four House members who voted against the bill were Reps. Helen Chenoweth-Hage, R-Idaho; Ron Paul, R-Texas; Bob Stump, R-Ariz., and Gene Taylor, D-Miss.  

Not voting were Reps. Merrill Cook, R-Utah; James Sensenbrenner, R-Wis.; Pat Danner, D-Mo.; and Bruce Vento, D-Minn. 

The House and Senate both passed electronic signature bills last year, but it took months of negotiations to reach a compromise that also satisfied White House demands that consumers get adequate protections from fraud and abuse --

© 2000 Al Bawaba (

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