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Analyses of The Electronic Signatures in Global and National Commerce Act have often focused on the act’s consumer consent requirements (E-Sign). [FOOTNOTE 1]Here, we address the opposite side of the equation: withdrawal of that consent. What, if any, are the limits on a company in designing the procedures necessary for withdrawal of consumer consent to receive information electronically? Can that company condition its further performance of services to a customer on a customer’s rendering and maintaining his or her consent to electronic notification? Absent actual notice from the consumer, are there circumstances in which a business can assume that a constructive withdrawal of consent has occurred? WITHDRAWAL OF CONSENT GENERALLY The possibility of withdrawal of consumer consent is mentioned repeatedly in the text of the act. � Sec. 101(c) states that a company may provide legally required records electronically if “the consumer has affirmatively consented to such use and has not withdrawn such consent.” � Sec. 101(c)(1)(B)(iii) provides that the company must inform the consumer of the procedures necessary to withdraw consent. � Sec. 101(c)(1)(B)(i)(II) provides in relevant part that the “clear and conspicuous” statement necessary to obtain the consumer’s consent must inform the consumer “of any conditions, consequences (which may include termination of the parties’ relationship), or fees in the event of such withdrawal… .” � Sec. 101(c)(4), titled “Prospective Effect,” provides that “[w]ithdrawal of consent by a consumer shall not affect the legal effectiveness, validity or enforceability of electronic records provided or made available” prior to “implementation” of the withdrawal. The combined effect of these provisions is that a company is free to conduct transactions entirely electronically, if it so wishes. The parenthetical reference to “termination of the parties’ relationship” as a consequence of withdrawal of consent permits an information provider to transform the consumer’s right to “withdraw” consent to receive information electronically into a right on the part of the information provider to terminate the relationship with the consumer. However, not all companies will wish to take the risk of alienating a potential customer by unduly conditioning his or her eligibility to conduct transactions on consent to receive electronic records. Such companies will have to find a balance between incenting consumers who may be leery about receiving electronic notices and deterring them from opting out of electronic notification once they have rendered this consent, [FOOTNOTE 2]all the while maintaining (at its expense) at least a minimal capability to deliver notices via paper. But whether a company decides to terminate its relationship with consumers who withdraw their consent or instead wishes to continue the relationship and provide notices nonelectronically, the company must be able to determine when a consumer has validly withdrawn consent within the meaning of E-Sign. While E-Sign makes the right to withdraw clear, it does not provide a great deal of guidance in determining when such a withdrawal has taken place. AFFIRMATIVE WITHDRAWAL AND PRESUMED WITHDRAWAL By providing that a consumer must be informed of the procedures for withdrawing consent, it is clear that E-Sign anticipates that withdrawals will involve an affirmative act on the part of the consumer. E-Sign itself anticipates two types of withdrawals: � The revocation of a previously given consent to electronic information (see � 101(c)(1) and other provisions cited above) or � The exercise of the consumer’s right to claim withdrawal because the information provider has not obtained renewed consent to electronic records according to E-Sign’s provisions (see � 101(c)(4)). But what happens when there are less certain, but still reasonable indicators that withdrawal may have occurred? Consider the following all too common scenarios: � A company’s e-mail is sent to a correct e-mail address but cannot be delivered because of a temporary disruption of e-mail service. � A company’s e-mail notification to a consumer is “bounced,” and the company is notified that no such e-mail address exists. � A company receives notice from the customer that the consumer has not had e-mail for four months, but the company’s e-mail notifications have not “bounced,” nor has the company received any other notification that prior e-mails have not been delivered. Has the customer withdrawn his or her consent in each case? May an information provider presume withdrawal of consent from these occurrences? What steps, if any, must the company take to validate the presumed withdrawal? Must the company begin sending paper records? May the company impose the penalties mandated by its withdrawal policy, possibly including termination of the relationship? CONTINUING ABILITY TO RECEIVE INFORMATION ELECTRONICALLY Guidance as to when a company should or should not presume a consumer’s withdrawal may be found in the fact that E-Sign does not expressly require a company to continually and actively monitor the consumer’s ability to receive information electronically. Rather, the provisions of � 101 imply that the company’s responsibility to monitor consumer accessibility is imposed only at the beginning of the relationship, i.e., in obtaining consent and complying with the “reasonable demonstration” requirement. [FOOTNOTE 3] After that point, the burden falls to the consumer, who must maintain such access to the Internet, appropriate computer equipment and a viable e-mail account. The company’s lack of continuing obligation to monitor consumer accessibility is underscored by E-Sign’s “material risk” provision, set forth in �101(c)(1)(D): only when a company elects to update its records delivery technology to such an extent that a “material risk” (the term is undefined) is run that a consumer will no longer be able to access them, must the company then undertake to renegotiate the customer’s consent. [FOOTNOTE 4] In our examples above, however, the company has not changed its delivery mechanisms. So how may it reasonably proceed? In the first example, a temporary disruption of e-mail service, the company is unable to complete the delivery process but, because it is not continually monitoring access, has only circumstantial evidence that the consumer is not able to receive further electronic deliveries. May the company declare the single delivery a failure to constitute withdrawal? Probably not. In such cases (particularly when bounce-back messages indicate the reason for the delivery failure as disrupted service), the company should emulate the procedures used by other delivery services, e.g., Federal Express and United Parcel Service. The company should first attempt to deliver the information at several reasonably spaced intervals before declaring it undeliverable and assuming the consumer’s constructive withdrawal. GUIDANCE FROM THE FEDERAL RESERVE The Federal Reserve has adopted an approach similar to that used by Federal Express and UPS by introducing a “Redelivery Requirement” into its interim regulations implementing the Truth in Lending Act (Regulation Z) and other laws under which it regulates. [FOOTNOTE 5]The proposed regulations — the most significant federal government guidance issued on the subject of electronically delivered information — provide that in the event a creditor or lender gains knowledge that a consumer has not received an electronic communication, as when an e-mail is “bounced,” the creditor or lender is under a good faith duty to take “reasonable steps” to attempt redelivery of the message “using information in its files.” [FOOTNOTE 6] The Fed has further commented that “[w]here a creditor actually knows that the delivery of an electronic disclosure did not take place, the creditor should take reasonable steps to effectuate delivery in some way.” [FOOTNOTE 7]The Fed was also careful to note that the requirement “is limited to situations where the electronic communications cannot be delivered and does not apply to situations where the disclosure is delivered but, for example, cannot be read by the consumer due to technical problems with the consumer’s software.” [FOOTNOTE 8] These proposals set a somewhat higher standard than the literal language of the act appears to require. The agency feels that this higher standard is consistent with the purpose and language of the act, and thus permissible under � 104(b). As a persuasive “common sense” interpretation of E-Sign, the Fed’s proposals may set a de facto standard for all industries, not just those directly affected by the Fed’s regulations. Thus, in our second scenario, the company has received a notice specifically indicating that the electronic transmission can no longer be delivered, the electronic equivalent of a “Return to Sender” message from the post office stamped on a letter. Receipt of such a notice can be reasonably relied upon as a withdrawal provided (1) the company has no other e-mail addresses on file for the consumer; and (2) has verified that its own address files are correct, i.e., that the information was not misdirected due to an addressing error of the company’s own making. Note that both of the first two scenarios link withdrawal to the actual receipt of an “undeliverable” notice and the performance of follow-up due diligence by the company. This dictates that each company must have procedures in place for the proper routing of such notices and the performance of such diligence. The third scenario, a notice from a consumer that she ceased being able to receive notices electronically some time previously, is a different matter. Has withdrawal occurred as of the time the consumer (1) says the e-mail service was canceled or (2) when the company actually receives the consumer’s notice? If withdrawal occurred when the e-mail service was canceled, must the company provide archive copies of all electronic transmissions since that date? E-Sign provides no clear answer, but arguably the company is under no obligation to provide copies that it legitimately sent to the consumer electronically, unaware that delivery had not occurred — any more than a company would be responsible if its hard copy mail had not been delivered by the U.S. Postal Service. Whether the company should thereupon assess charges for presentation of hard copies of the missing information is a matter resting more on the company’s business practices than on its legal obligations under E-Sign, although most companies will find it prudent as a matter of customer policy to provide a reasonable number of “missing” records without charge. TIPS FOR COMPANIES HANDLING THE WITHDRAWAL OF CONSENT ISSUE � In addition to setting withdrawal conditions, fees and effects, provide consumers with a clear “Terms of Service” statement setting forth the common circumstances in which they will be deemed to have withdrawn consent. � Consider adopting emerging standards from heavily regulated industries where rules are likely to be adopted early, e.g., the Federal Reserve Interim Regulations. � Adapt proven techniques from other “information delivery” industries, such as UPS’ three unsuccessful delivery tries, before declaring a withdrawal. � Ask for multiple e-mail addresses; build your e-mail system so that alternate e-mail addresses are automatically used in the case of a bounce-back, notification of e-mail system failure/unavailability, or incorrect e-mail address notifications. � Add return receipts to transmissions. � Build appropriate safeguards and error detection and correction capabilities into your e-mail distribution system, or require such safeguards from your third party e-mail handler. � Use the “clear and conspicuous” statement to stress that the consumer is responsible for filing or keeping track of his or her records as if they were paper, and that it is the consumer’s responsibility to archive such information. � Where a company receives actual notice from a consumer that he or she has not received previous messages, consider providing paper copies of the records in question. William E. Bandon, III is a partner in the New York office of Brown Raysman Millstein Felder & Steinerand Donald R. Ballman is an associate in the firm’s Hartford, Conn., office. Ian Gold, a summer associate at the firm, assisted in the preparation of this article. ::::FOOTNOTES:::: FN1Electronic Signatures in Global and National Commerce Act, Pub. L. 106-229, 114 Stat. 464 (codified at 15 U.S.C. 7001 (2001)). FN2A customer may always request a paper copy for a fee. SeeE-Sign, �101(c)(1)(B)(iv). FN3 Seefootnote 1. FN4If the company does not regain the consumer’s consent, its failure to do so may, at the election of the consumer, be treated as a withdrawal of consent. E-Sign �101(c)(4). FN5On March 29, the board has issued interim final rules on Regulations B (Equal Credit Opportunity), E (Electronic Fund Transfers), M (Consumer Leasing), Z (Truth in Lending) and DD (Trust in Savings). The board expects to release final regulations Oct. 1. The regulations are available at www.federalreserve.gov/Regulations. FN612 C.F.R. �226.36(e) (2001). FN7Truth in Lending, Interim Rule, 66 Fed. Reg. 17329, 17336 (Mar. 30, 2001). FN8 Id.

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