| March 16, 2001 DELIVERED BY ELECTRONIC AND REGULAR MAIL Secretary By Electronic Mail Address: esign-study@ftc.gov
Dear Sir: This letter is submitted on behalf of Wachovia Corporation and Wachovia Bank, N.A. (hereinafter collectively referred to as "Wachovia"). Wachovia Corporation is an interstate financial holding company with dual headquarters in Atlanta, Georgia and Winston-Salem, North Carolina, serving regional, national and international markets. Its member companies offer personal, corporate, trust, and institutional financial services. Wachovia Bank, N.A., the principal subsidiary of Wachovia Corporation, has more than 650 offices and 1,300 ATMs in Florida, Georgia, North Carolina, South Carolina, and Virginia. Background Wachovia is actively involved in the business of electronic banking and continues to pursue new avenues for offering electronic financial services to the public. Within the parameters of safe and sound banking practices, Wachovia desires to use electronic delivery systems to offer a wide range of products and services allowed by law, from the sale of specific financial services to advertising to cross selling to management of financial services. As Wachovia has become more and more involved in electronic commerce ("e-commerce"), we have struggled with issues that are not defined clearly in state and federal laws and regulations. This lack of clarity causes increased risks for the services that Wachovia does offer online, and can be an impediment to Wachovia's continued development of electronic offerings. Wachovia understands that two of the goals of ESIGN were to eliminate issues relating to the validity of contracts created electronically and to create a uniform national standard for electronic contracts used in interstate commerce. We also understand that the drafters of ESIGN intended that the law be applied and interpreted broadly. As Wachovia has attempted to take advantage of the protections of ESIGN with regard to electronic service offerings, we have found certain provisions of the law to be ambiguous and burdensome to implement. Accordingly, while ESIGN has provided an important step forward, Wachovia believes that these stated goals have been met only partially, and that further clarification of ESIGN will assist the financial services industry in offering new and expanded financial services in an online environment. Wachovia's practical experience since the enactment of ESIGN highlights these issues. Wachovia's website and online services and information have been recognized nationally by trade organizations and publications. While Wachovia's delivery of web-based services is dynamic and responsive to customer demand, most of the services are supported at present by paper delivery of documents and records. Wachovia presently has more than 500,000 consumer customers who use deposit-related services through online delivery channels. In addition, Wachovia offers other financial services, which primarily are paper-based, but which offer adjunct online information for the convenience of our customers. Wachovia delivers few of these services only in an electronic format, due, in part, to our uncertainty with the language and application of ESIGN. For the sake of clarity in the following paragraphs, the word "merchant" is used to mean any person or entity that offers goods and/or services through an electronic media delivery channel. "Consumer" shall have the same meaning as §106(1) of ESIGN. While Wachovia supports further scrutiny on other sections of ESIGN, our remarks in this letter are limited to §101(c)(1)(C)(ii), without further reference to the subsection number. Statutory Ambiguity The language of the statute is so broad as to expose the merchant to risk of loss if the merchant delivers electronic goods and services under ESIGN. While state laws, except UETA, are pre-empted, the merchant is left to decide many questions, which are open to interpretation by the judicial system. The following examples illustrate this problem.
Wachovia believes that the electronic commerce will benefit by clarification of the statutory ambiguities which we have described, without limiting consumer protections. Statutory Burden Much of Wachovia's delivery of electronic services and information has been developed, in large part, in response to customer demand. Prior to the effective date of ESIGN, Wachovia delivered online banking services to its customers using standard contract procedures. Online banking services were, and are, optional and, with the exception of a separate Bill Payment service, are free to our consumer banking customers. Online banking customers must first have deposit accounts with Wachovia. The deposit contract is established on paper in accordance with basic contract law. Prior to ESIGN, online banking customers received their Online Banking Service Agreement online as part of the online application process. We have no record of a complaint that the customer did not know he/she would receive records electronically. When ESIGN went into effect on October 1, 2000, Wachovia faced the challenge of balancing customer demand for electronic services against the concerns of compliance with a law fraught with legal ambiguities. Wachovia redesigned its online banking website to include a separate ESIGN Consumer disclosure and consent form, which appeared first in the application process. The customer is required to acknowledge receipt of the terms and his/her consent to receive documents electronically by clicking an "I agree" button on the screen ("Accept Click"). If the customer does not accept the terms of this disclosure, the application process is terminated. If the customer accepts the ESIGN disclosure, he/she then receives the Online Banking Agreement. The customer is required to click an "Accept" button before he/she can complete the application process. The time that it takes for customers to complete the application process for online banking services at Wachovia has increased significantly since ESIGN went into effect. The reaction of our customers to the requirement to read two agreements and to Accept Click twice has been overwhelmingly negative. While Wachovia does not believe that the additional disclosure requirements have deterred customers from requesting online banking services, we agree with our customers that the statutory burden of the ESIGN consumer disclosure is excessive. Aside from negative consumer reaction to being presented with multiple pages of legal materials, Wachovia believes that consumer consent requirements can burden and can inhibit technological creativity for certain types of delivery. For instance, if all disclosure documents, agreements and electronic records are presented in HTML, and the customer is able to click through the disclosures and submit enrollment information, Wachovia submits that the customer has consented in a manner that reasonably demonstrates his/her ability to access the electronic records. However, when certain other formats or methods of exchange of information are used, it becomes more difficult to show that the consumer has consented in a manner that reasonably demonstrates that he/she can receive the information. For instance, it has been a typical practice for consumers to sign up via HTML pages on a web site to receive certain information by email, or by a .pdf attachment to an email. In such an instance, a merchant must require the consumer to take additional sign-up steps to show that he/she can actually receive the email or access the attached file, or must try to build new technological processes to make this determination. We submit that most consumers will be unhappy with these processes, or simply will determine that it is too burdensome to finish signing up. Wachovia agrees that merchants should be required to document and disclose in the Agreement what type of technology is necessary to utilize the service. Wachovia also believes that it is reasonable to require that the consumer should bear the burden of notifying the merchant if the service or information is not available to the consumer. If there is concern that consumers will be required to pay for services not received, the statute can be amended to provide for a type of rescission process which will allow the customer to recoup service charges related to the electronic service. Many merchants have created "My Account" services on their websites. Consumers submit certain personal information that is retained in a secure area for subsequent customer use. Goods and services can be purchased at irregular intervals, using a "My Accounts" dynamic that avoids repetitive entry of personal data. In this environment, one to two Accept Clicks are needed to complete a transaction. If we can presume that some of these transactions involve a statute, regulation or other rule of law that requires a writing, merchants are required to place ESIGN disclosures on their websites as part of the My Accounts process. Not only is an additional Accept Click required, but the software must be programmed to assure that there is some form of electronic record to demonstrate compliance. Merchants and consumers are inconvenienced by these additional Accept Clicks. Wachovia submits that it is the consumer who seeks electronic services. When the consumer provides a merchant with personal information on a website, he/she expects information to be delivered in an electronic format. The consumer is not surprised or legally disadvantaged by such electronic delivery so long as the customer is aware of the hardware and software requirements to receive the information. We see no positive benefit to delivery of a separate explanation, to which the consumer must signify separate electronic consent to receive information or services in electronic format. Many consumer regulations permit certain defined disclosures to be placed within related documents. The Truth in Lending Act permits the "federal box" to be included in a consumer borrowing agreement. Electronic Fund Transfer Act disclosures can be incorporated into deposit agreements. Notices arising from the Deceptive Practices Act need not be separate from other loan terms. Wachovia submits that consumers will not be misled or legally harmed by inclusion of revised and simplified ESIGN disclosures into the contracts, agreements or other information the consumer receives with respect to the underlying transaction. If there is a concern that the consumer may not easily find or will not notice the specific ESIGN disclosures, a "more conspicuous" standard can be applied. This standard has been well-defined in regulations and by the courts. The electronic industry and its consumer users will benefit by this change in the law. Summary Wachovia requests that the Secretary, when making the report required by ESIGN § 105(b)to Congress, recommend the following statutory changes:
Wachovia believes that ESIGN has "opened the door" to a new era of electronic services. However, in its present format, ESIGN exposes merchants and consumers to risk of loss from varying interpretations of the ambiguous sections of ESIGN. The consumer protection objections of ESIGN can be met in a less burdensome manner. While no statute can be drafted to protect all persons from all risks, Wachovia believes that the merchants offering electronic services and the consumer utilizing these services will be well-served if the difficulties with ESIGN which we have discussed in this letter can be resolved. Wachovia appreciates the opportunity to make these comments to the Secretary. Very truly yours, (Original Signed by Lawrence G. Baxter) Lawrence G. Baxter Electronic Copy to:
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