March 16, 2001
Secretary, Federal Trade Commission
Ladies and Gentlemen:
Thank you for the opportunity to comment on the benefits and burdens of requiring consumer consent to receive information electronically pursuant to § 101(c)(1)(C)(ii) of the Electronic Signatures in Global and National Commerce Act ("E-sign"). Household Bank (Nevada), N.A., Household Bank (SB), N.A., Household Bank, f.s.b., Household Credit Services, Inc., Household Finance Corporation, Household Automotive Credit Corporation, and Household Retail Services USA (collectively "Household"), respectfully provide the following comments. Household is a leading provider of consumer financial products with 45 million customers and 35,000 employees worldwide. In connection with the provision of most of these products, Household is legally required to provide certain disclosures. With respect to several of its loan products, Household either provides or is considering providing these disclosures through electronic means.
E-sign allows a business to provide or make available to consumers information mandated by a statute, regulation or other rule of law via electronic communication, provided that the consumer affirmatively consents to such disclosure in a manner that reasonably demonstrates the consumer's ability to access the information. Household acknowledges the value of statutes like E-sign that facilitate the use and growth of electronic commerce. The dramatic growth in the use of the internet as a means to access financial products and services makes it feasible for consumer disclosures and other information to be provided to consumers in what is often a more cost-efficient and consumer-friendly fashion than the traditional paper-based format. Household is beginning to enable consumers to receive such electronic information in several of its businesses. For example, Household operates websites that allow a consumer to consent to electronic disclosures prior to completing a consumer credit application. On these sites, when a consumer clicks on a "button" to select receipt of electronic disclosures, Household obtains an affirmative answer from the consumer regarding the consumer's computer capability and the consumer's desire to receive electronic information regarding their account. Once we confirm receipt of the consumer's consent to receipt of electronic communications by affirmative response, the consumer may then continue with the credit application. By providing consumers the ability to open the disclosures by using a "link" or "icon" that allows them to read or print the disclosures, the electronic disclosures meet the same standard of delivery as written disclosures.
In contrast, we note that requirements for separate after-the-fact acknowledgement or consent for various disclosures may provide considerable administrative burdens arising from the need to track such acknowledgements. For example, 12 CFR § 14.40(c)(7) requires a separate specific acknowledgement that a consumer has received certain insurance sales disclosures. This requirement applies to credit insurance, which is often sold at the time of loan origination. This type of additional requirement for individual disclosures may frustrate the sale of financial products through electronic means because it will entail separate tracking and retention systems for the later acknowledgements.
Additionally, while we support the E-sign structure that allows consumers to agree in advance to receipt of electronic disclosures, we are concerned that the law could burden financial institutions by creating significant record retention requirements. Specifically, the statutory requirement to ensure a consumer's consent prior to receiving electronic disclosures may result in a duty for the financial institution to retain such acknowledgments for a period of time. For example, should the initial consent be treated as part of the consumer application, the retention period could be up to two years. No parallel retention requirement exists for paper disclosures, as acknowledgement of a preferred method of delivery of such disclosures is not required (nor is it industry practice). This retention requirement means that financial institutions may need to adopt new or additional electronic infrastructure reserves to handle these electronic interactions. Litigation exposure may also require such retention to protect against allegations that consumer consent was given unknowingly or even involuntarily.
Another area of concern for financial institutions is the question of what type of information is needed to explain to consumers the technical requirements for receiving and retaining disclosures and what responsibility the institutions have with respect to a consumer's actual systems capabilities. To help address consumer concerns with respect to computer capabilities, our websites may include both an "800 number" and a post office box address for inquiries or requests for electronic disclosures. However, while the E-sign consent requirements ensure that consumers enjoy at least the same consumer protections with respect to electronic disclosures as they do with respect to paper disclosures, we are concerned that consumers should take responsibility for determining whether they can effectively receive electronic disclosures. Such responsibility would serve the same purpose as a loan customer's current obligation under most loan contracts to notify the creditor of a change of address. As currently written, Section 101(1)(c)(ii) provides that a consumer's consent must "reasonably" demonstrate that the consumer can access information in the form in which it will be provided. Because there is virtually no way a creditor will know what systems capabilities a consumer has, we suggest that, at a minimum, consent that is transmitted in the same electronic method in which the disclosures will be provided (e.g., via e-mail or over a website) should be presumed to meet this E-sign standard.
The Internet is the essence of interstate commerce. It creates the opportunity to provide consumers with the products they seek in a rapid, cost-efficient manner. Thus, while appropriate protections must be provided to all consumers, these must be balanced with the need to avoid overburdening the commercial enterprises that are striving to utilize this vital new medium.
We appreciate the opportunity to provide these comments.