Go Green, but Comply With E-Sign

A question-and-answer guide to E-Sign compliance.

July 16, 2011

CUNA’s regulatorycompliance team receives loads of questions every month regarding e-statements, home banking, and compliance with the Electronic Signatures in Global and National Commerce Act (ESIGN). This is no doubt because many institutions continue moving away from paper to “go green” and reduce mailing costs.

So here’s a list of the top 10 ESIGN questions we’ve received from state leagues and our member credit unions:

1. Does it matter what digital signature or home banking platform the credit union uses to comply with ESIGN? No. ESIGN is “technology neutral”: It doesn’t require or recommend the use of any particular technology for electronic records or signatures. Credit unions can make that decision.

2. How should members consent and/or confirm their consent electronically? Non-electronic consents aren’t valid under ESIGN. The member can’t sign up for home banking or e-statements by printing a Web page, signing it, and mailing it back to the credit union. ESIGN requires consumers to express their consent electronically, or confirm their consent electronically, in a manner that “reasonably demonstrates” that they’ll be able to access information in an electronic format. So, after reading the online disclosures, members should be able to click some kind of “I agree” button on the credit union website to “e-sign” the online agreement. (See question No. 8 also.)

3. What ESIGN disclosures must the credit union provide before obtaining the member’s consent to receive electronic records? Before consenting, a consumer must receive a “clear and conspicuous” statement of the following:

  • Any right or option to have the record provided or made available on paper;
  • The right to withdraw consent and any related conditions, consequences, or fees;
  • Whether the consent applies only to this particular transaction or to “identified categories of records” that may be provided or made available during the course of the parties’ relationship;
  • The procedures the consumer must use to withdraw consent, and the information needed to contact the consumer electronically;
  • How the consumer may, upon request after the consent, obtain a paper copy of an electronic record, and whether any fee will be charged for such copies; and
  • A statement of hard
  • ware and software requirements for the access and retention of electronic records.

If your credit union is just getting started in this arena, type “home banking” or “e-statements” in any Internet search engine. You’ll find plenty of examples of other financial institutions’ websites and online agreements. This is for illustration purposes only—please don’t adopt any other institution’s online agreement “as is.” Be sure your legal counsel drafts and/or reviews any online agreements before you post them to your website.

4. Can the credit union provideall communications electronically once the member signs up for home banking? The answer depends on the online account agreement. The answer is yes if the member agreed to receive all communications from the credit union electronically. If not, the credit union could provide the option to sign up on its website.

5. Can a credit union convert all members to e-statements en masse? No. ESIGN requires voluntariness (i.e., affirmative consent or opt-in), so the credit union can’t require members to sign up for e-statements or sign them up automatically without their consent. But they can encourage the use of e-statements by providing incentives. (See question No. 7.)

6. Regarding question No. 5, does this answer hold true for members who already have signed up for home banking but still receive paper statements? It depends on exactly what members agreed to when they signed up for home banking. If they signed up only for online account access, then the credit union would still need to obtain their consent to receive e-statements. But many credit unions have members who signed up for both account access and e-statements, and are still receiving paper statements, too. In this case, the credit union’s goal
is to encourage members to “go green” and “opt-out” of their paper statements.

The credit union’s next step could be as simple as directing members to log in to the home banking website and click on the “sign up for e-statements” button. When members click on the link, they’ll receive information on how to change their statement delivery method as well as the appropriate disclosures regarding
any additional system requirements needed to access e-statements,
how to switch back to paper statements, e-mail confirmation (e.g., for sign-up confirmation or statement availability notification), etc.

7. Can a credit union charge members for paper statements? Yes.  According to CUNA’s conversations with Federal Reserve Board staff, there’s no regulatory prohibition on charging for paper statements in either Regulation E (Electronic Fund Transfers) or Truth in Savings. So credit unions are allowed to charge a reasonable fee for paper statements as an incentive for members to sign up for e-statements. But credit unions considering this option also should address how they’ll disclose the new fees, and handle members who don’t have access to computers (e.g., fee waivers).

8. Can front-line staff sign up members for e-statements in the credit union office? ESIGN requires members to consent electronically, or confirm their consent electronically after receiving the appropriate disclosures. So, if members sign up on paper at the credit union, they must then confirm their consent electronically using their own hardware and software. The consent isn’t valid until members confirm electronically.

9. Is the credit union required to redeliver returned e-mail messages? No. The Fed’s 2001 interim rules on electronic disclosures under Regulations B, E, M, Z, and DD contained e-mail delivery and redelivery requirements. But the Fed withdrew these regulations in 2007.

The current regulations don’t mandate any particular means of electronic delivery of disclosures, such as sending and re-sending disclosures via e-mail. So, it’s now up to the credit union to determine how to handle undeliverable e-mail messages. But if there are reasonable grounds to suspect that a member didn’t receive an e-mailed document, most credit unions will go ahead and mail the document to the member.

10. How long must a credit union website maintain copies of e-statements online? ESIGN doesn’t prescribe how long to keep records available online. The Fed’s former electronic communication regulations required retention of electronic disclosures posted on a website for at least
90 days. But, as previously mentioned, these regulations were withdrawn in 2007. And, as it turns out, the financial services industry’s standard practice is to retain the information for much longer than the 90 days. So, it’s up to the credit union to decide how long to maintain these documents online.

Please send any other ESIGN questions to, and we’ll start working on the next top 10!

For more information on ESIGN, see CUNA’s e-Guide to Federal Laws and Regulations.

VALERIE MOSS is CUNA’s director of compliance information. Contact CUNA's compliance department by email here.