The Electronic Disclosures Delivery Act of 1999 (HR 2626)

Will Eviscerate Federal Consumer Protection Laws

 

HR 2626 would radically undermine the prophylactic intent of the six major federal consumer protections laws:

 

*                     Truth in Lending Act

*                     Equal Credit Opportunity Act

*                     Fair Credit Reporting Act

*                     Real Estate Settlement Procedures Act

*                     Truth in Savings Act

*                     Consumer Leasing Act.

 

If passed, this bill will unquestionably lead to fraud and consumer abuse by financial services providers who would easily be able to manipulate electronic communications to confuse and mislead consumers regarding their right to insist on paper disclosures and communications, and regarding the terms and provisions of the information provided electronically. Yet, it should be clear:  This bill is not necessary to facilitate electronic commerce over the Internet. There is nothing in the law currently to prevent financial service providers from communicating with consumers over the Internet, and simply providing paper copies.

 

HR 2626 would allow all information, disclosures, notices, documents and other written materials  required by these six federal consumer protection laws to be delivered electronically, instead on a paper writing, once these minimal standards are met: 1) the consumer receives a description of the type of information to be delivered, 2) the consumer receives an explanation of how to access and retain this information electronically, 3) the consumer is informed about the period of time the information will be available in electronic form, and 4) the consumer "expressly consents by electronic means."

 

The consumer will be consenting to receive essential information in a complex format, before the consumer knows the contents and importance of the information to be received.  At the outset of a consumer transaction few people expect it to become adversarial. At this point, consumers are generally most interested in determining their costs, not in preserving their rights in case of a future dispute.  Yet, in this bill, at this early point of the transaction consumers are expected to a) understand the importance of disclosures and information not yet received, b) understand the technology and capability of a computer to receive, retain and print information before it is received, and c) guarantee that this  technology and capacity to receive, retain and print the information will also be available at uncertain dates in the future. It is important to keep in mind that under many of these consumer protection laws there are ongoing requirements on financial service providers to provide information during the course of the entire contractual relationship (for example: monthly disclosures under open end contracts, and change in terms notices in other contracts under Truth in Lending;  information on escrow accounts and change in mortgage servicers under Real Estate Settlement Procedures Act.)

 

What will happen to information provided to the consumer, if the consumer turns out to be mistaken regarding the capacity or  technology of  the computer? What will happen if  the consumer agrees to receive ongoing information in an electronic format and the computer breaks? Or the consumer begins using another computer which does not have the same capabilities? Can the consumer change his or her mind? Under HR 2626, the financial services provider will not necessarily be required to provide paper copies. Crucial information about the consumer's rights and obligations will not be received.

There is no requirement that the electronic information be provided in a format which will ensure that when the consumer does download and print the information received that it will be in a form that is self‑authenticating.  With electronic paperwork , there can be multiple electronic originals, with no indication of which is the one that was provided on a certain date by the creditor, and received on that date by the consumer. In the paper-based world, this issue is easily resolved with picture copies: they all look alike. Yet, when information is provided electronically, for it to be useful at a later time to prove its contents, the electronic file must be tamper proof. Otherwise, a consumer may inadvertently change a single byte on the file and thus make it technically different from the original, and useless to prove its contents -- the terms of the information provided.

 

There is no requirement that the consumer's consent to receive the information electronically be meaningful and real. Will a financial services provider be permitted to require a consumer's consent to receive information electronically before it will do business with the consumer? If so, is that meaningful and real agreement? If a provider charges hundreds of dollars more to those consumers who do not consent to receive information electronically, is that meaningful consent? If providers are permitted to charge extra for paper, then many cost conscious consumers may well consent to receive information electronically, even when they do not have the technological capacity to receive, retain and print it. Allowing providers to charge money for providing federally required consumer information is a radical and dangerous change to federal law.

 

Also, the requirements for proof of the consumer's consent to receive the information electronically are meaningless ‑‑ is a single click sufficient? What happens if the consumer insists that he did not consent to receive information in this format, on whom will fall the burden of proof?

 

This bill goes too far. It is not necessary to facilitate commerce on the Internet. A much better approach would be to pass a law which would simply do the following:

 

1)         Allow the information required by these laws to be provided electronically to a consumer who has initiated the transaction from a computer terminal within the control of the consumer,

2)         Only so long as the information which is provided electronically is also provided in paper form at no extra charge.

 

 

*                     Consumer Action

*                     Consumer Law Center of the South

*                     Consumer Federation of America

*                     National Consumer Law Center

*                     U.S. Public Interest Research Group

 

For further information, contact:

Margot Saunders

National Consumer Law Center

(202) 986-6060