|July 7, 1998
Federal Trade Commission
Sixth Street and Pennsylvania Avenue, N.W.
Washington, D.C. 20580
Dear Sir or Madam:
This comment letter is submitted on behalf of MasterCard International Incorporated ("MasterCard") in response to the request for comment from the Federal Trade Commission ("FTC") regarding the issuance of a policy statement concerning the newer forms of electronic media, such as e-mail, CD-ROMs, and the Internet ("FTC Request"). The comments set forth in this letter address various issues raised by the FTC Request, in the context of the financial services industry. MasterCard greatly appreciates this opportunity to comment on the FTC Request.
With the rapid growth of computer-based and other electronic communications in recent years and the anticipated acceleration of this growth during the next several years, an increasing number of consumers and businesses, including many members of MasterCard, will utilize these advances in the context of their electronic banking activities. As a result, it is crucial that federal guidance provide sufficient flexibility to accommodate the electronic delivery of information between a business and its customers whenever those parties decide to communicate in this fashion.
In addition, it is important to recognize the developments and opportunities that lay ahead. The needs and expectations of consumers are constantly changing as electronic communication becomes more the norm than the exception in society. Todays consumer is increasingly mobile with less disposable time to spend on issues outside of family and work. As a result, consumers have become increasingly more attracted to and more dependent upon the convenience of electronic communication. Consumers expect their service providers to provide programs and services that conform to this lifestyle. The FTC should provide businesses with the regulatory means to meet these consumer needs and desires.
Thus, in developing and implementing its policy statement, the FTC should avoid provisions that would impede the forward force of technological innovation. Instead, the FTC should allow businesses sufficient flexibility to develop and establish fundamental programs and services in an electronic environment.
MasterCard commends the FTC for acknowledging the burgeoning use of electronic methods of interacting with consumers, and for recognizing the importance of permitting the use of electronic communication as a substitute for paper exchange. The broadened ability to communicate with consumers electronically is essential for the continued advancement of on-line services to consumers at reasonable rates. Flexibility is of paramount importance given the inherent uncertainty in this undeveloped market. The following comments focus on the portions of the FTC Request which discuss those instances in which a business is affirmatively required to make disclosures to a consumer.
Consumer Agreement on Electronic Communications
MasterCard believes that businesses should be permitted to communicate electronically with consumers particularly in those instances where a business and a consumer "agree" to use electronic communications. In any circumstance where the consumers "agreement" is required to furnish electronic communications, however, regulations should not impose formalistic requirements on how this agreement must be achieved. For example, there should be no requirement for separate agreements, and subjective tests should not be imposed. In addition, any suggestion that a business establish what the consumers state of mind was at the time the consumer agreed to accept electronic communications (such as establishing that the consumer acted "intentionally" or "knowingly") should be rejected. Such a standard would provide little additional protection and is an invitation to litigation.
Moreover, guidance in this area should not attempt to specify when an agreement between a consumer and a business is deemed to exist. Instead, the existence of such agreements can be determined by applicable state law.
Furthermore, MasterCard strongly believes that any guidance in this area should specify that a business and a consumer are not precluded from entering into an agreement electronically. This ability to agree electronically is essential for establishing on-line relationships.
While many disclosures must conform to particular standards (e.g., the "clear and conspicuous" standard), MasterCard believes that the FTC should not require that the entire text of an electronic communication be displayed in its entirety at the same time in order to satisfy such standards. Similarly, the FTC should refrain from imposing other specific requirements on electronic disclosures, such as requiring a certain type size or page length. For example, businesses should be permitted to display the text of the disclosure in sections or paragraphs that would enable the consumer to comprehend or understand the text. In fact, displaying the entire text at one time could require the use of such small typeface that the consumer would be discouraged from reading the disclosure at all.
The Retainability of Electronic Communications
MasterCard strongly believes that businesses should not be required to monitor the ability or practice of consumers to obtain and retain electronic communications. In this regard, businesses should not be required to monitor a consumers ability to retain information sent by electronic communication, nor to take steps to find out whether the consumer has in fact retained it. Thus, MasterCard believes that a business should not be required to ascertain the ability of consumers to download or retain disclosures, any more than a business currently is required to ascertain whether consumers actually open, read or retain their mail. In other words, a business, operating in an on-line environment, should be able to assume that consumers have the ability not only to read the information provided to them electronically, but to download and preserve that information, particularly where those consumers have agreed to receive electronic disclosures.
Furthermore, even assuming that the consumer elects to download and print out the electronic communications, there should be no obligation to monitor whether the consumer retains information sent by means of electronic communications. The imposition of any such requirements on businesses would impose substantial compliance burdens and would be an impediment to the development of electronic communications systems.
Paper Duplicates of Electronic Disclosures
MasterCard strongly believes that businesses should not be required to provide paper copies of disclosures to a consumer upon request, if the consumer has agreed to receive disclosures electronically. Most businesses, as a matter of customer relations or to preserve a consumers account, will accommodate such a request from a consumer. However, a requirement mandating that businesses provide consumers with paper duplicates would significantly undermine the important flexibility of allowing a consumer and the entity with whom the consumer chooses to do business, to agree to provide and receive information electronically.
No Requirement to Determine That Consumers Have Operational Equipment Needed to Access Electronic Communications
MasterCard believes that it should not be necessary for a business to determine whether a consumer actually has the equipment necessary to receive electronic communications, or that the equipment currently is operating properly, particularly where a consumer has agreed to communicate electronically. Thus, where a business has described the service and the equipment or types of equipment that can be used by the consumer for that service, and the consumer agrees to receive that service and the electronic communications relating to that service, the business should be able to satisfy disclosure requirements merely by transmitting the electronic communication or communications to the consumer in a format or protocol that permits the communication to be received.
Businesses Should Be Able to Offer Programs and Services that Require the Use of Electronic Communications
In the process of distributing solicitations and applications to consumers or in making services available to the general public at its website, a business should be able to require electronic communications as a precondition to receiving certain electronically based programs or services. More specifically, a business should be able to specify at the time the consumer contracts for a particular program or service whether disclosures, notices and other information required to be communicated under applicable regulations will be provided through written paper communications or through electronic communications.
Assuming that the contemplated use of electronic communications is clearly stated, a consumer would not sign up for a program or service that includes electronic communications if he or she were not comfortable with these electronic communications. If the consumer determines to accept that program or service, the business should not be required to subsequently provide the disclosures in paper format, even if the consumer subsequently determines that he or she would prefer the disclosures in paper format, if it was clear at the outset that electronic communications were contemplated for that program or service.
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Once again, MasterCard greatly appreciates this opportunity to comment on the FTC Request. If you have any questions concerning these comments, or if we can otherwise be of assistance in connection with this matter, please do not hesitate to contact me, at (914) 249-5595.
Noah J. Hanft