Electronic signature law could boost e-commerce

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Wednesday June 28, 2:56 pm Eastern Time

Electronic signature law could boost e-commerce

By Michelle V. Rafter

LOS ANGELES, June 28 (Reuters) - By July 4, President Bill Clinton is expected to sign into law a bill that will help people declare their independence from signing contracts and other legal documents the old-fashioned way: with pen and paper.

The legislation, which the House and Senate approved by overwhelming margins earlier in June, would make electronic signatures as legally binding as the pen-and-paper variety.

Advocates claim the Electronic Signatures in Global and National Commerce Act -- which, once signed, would take effect Oct. 1 -- will help pave the way for a new era of electronic commerce, where companies from mortgage brokers to car dealers could complete transactions online that previously required a signature on paper.

E-commerce today is about buying books, flowers and airline tickets. Thanks to electronic signatures, the next level will be executing binding documents to buy cars, houses and companies, said Brent Israelsen, founder and chief executive of iLumin (http://www.ilumin.com), a private company in Orem, Utah, that makes electronic signature technology.

Supporters also expect the law to speed up the shift from paper to electronic documents in government agencies at all levels. In one early example, the Utah County, Utah, district attorney's office has been using iLumin's technology to file criminal cases since February 1999. Last September, the county recorder there started using the same technology to process real-estate property deeds.

Electronic signature legislation has its critics. Consumer advocates worry that it doesn't provide enough protection against fraud, and could leave computer have-nots even further behind than they already are.

The bill doesn't spell out what technology should be used to identify and authenticate parties agreeing to put their electronic signatures on a contract. Nor does it specify what form those electronic signatures should take.

As a result, ``electronic signature'' could mean a digital certificate or encrypted key that someone uses to authenticate themselves. Or it could be something as simple as agreeing with the other party in a contract that your name typed at the end of a document sent via e-mail message is legally binding.

That vagueness is viewed as a plus because it doesn't exclude future electronic signature technology. But it opens up the possibility of someone trying to impersonate someone else and falsely signing an online contract on their behalf, claims Margot Saunders, managing attorney at the National Consumer Law Centre (http://www.nclc.org) in Washington.

Likewise, there's nothing in the law to stop a mortgage broker, for example, from demanding that would-be home buyers sign online contracts instead of the print kind, a policy that would be detrimental to low-income consumers without access to computers, Saunders said.

Privacy advocates also are concerned that electronic signature legislation could eventually result in everyone in the country having a digital identification number or code that could be used to track their personal information, said Ari Schwartz, policy analyst for the Centre for Democracy and Technology (http://www.cdt.org) in Washington.

Industry officials feel confident that they're building technology that would make it difficult or impossible for someone to assume someone else's identity online, or obtain someone's personal information without their permission.

For example, iLumin's technology has a built-in audit trail, so a company's privacy officer could detect whether anyone was tapping into customer information that was meant to be private, said iLumin Chief Executive Israelsen.

Bills giving electronic signatures the same legal status as written signatures have floated around Congress for several years. But federal lawmakers wrapped up in Y2K worries only recently started giving the issue serious consideration.

In the absence of federal law, an estimated 46 states have passed some kind of electronic signature legislation since 1995. Many of those state regulations will be pre-empted once the federal law takes effect.

Many companies that make electronic signature and digital signature technologies also have been around since the mid-1990s. But until now they have focused on selling their products to corporations, which used them mainly for security purposes. Now, vendors expect the government's seal of approval to help electronic signatures gain more widespread acceptance, especially in online sales to consumers.

Privately held iLumin has signed deals with close to 40 business partners, including Dell Computer Corp. (NasdaqNM:DELL - news) (http://www.dell.com), AT&T Corp. (NYSE:T - news) (http://www.att.com), VerticalNet Inc. (NasdaqNM:VERT - news) (http://www.vertical.net), the business-to-business marketplace; and Neiman Marcus Group Inc.(NYSE:NMGa - news) (http://www.neimanmarcus.com).

Digital Signature Trust Co. (http://www.digsigtrust.com), a Salt Lake City subsidiary of Zions Bancorporation (NasdaqNM:ZION - news), has developed a digital signature technology called TrustID it is selling to financial institutions. In the service, consumers will pay a bank $24 for a TrustID certificate they could use when completing a loan or other transaction at a participating merchant, who would check with the bank to authenticate the person's identity and signature. Digital Signature says it's signed up several banks as customers, including Zion.

Law firms and other paper-intense industries also stand to gain, vendor officials said. One company, realLegal.com (http://www.reallegal.com) of Denver, sells an online transcript service that attorneys use to order depositions or trial transcripts that have been digitally signed by court reporters.

To emphasise what a big deal the new law is, realLegal.com's founder and president, Marty Steinberg, has been putting out feelers to the White House to encourage Clinton to sign the Electronic Signatures in Global and National Commerce Act online, using an electronic signature.

As of Tuesday, Steinberg hadn't heard back from Washington. If it happens, it could be the biggest endorsement of electronic signatures yet.

(Michelle V. Rafter writes about the Internet from Los Angeles. Reach her at mvrafter(at)delta.net. Opinions expressed in this column are her own.)

-- (what@s.new), July 03, 2000

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