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Consumer Banking and Payments Law: 11.8.2 FHA Electronic Signature Requirements

In early 2014, HUD specifically approved electronic signatures for FHA mortgages.612 HUD’s instructions for the use of electronic signatures include numerous protections to ensure that the mortgagor—the homeowner—intended to sign the actual document to which the electronic signature is attached, and that the document cannot be changed after this signature is attached. The instructions contain the following:

Consumer Banking and Payments Law: 11.1.4a The General Rule As to Validity of Electronic Records and Signatures

E-Sign provides that, notwithstanding any statute, regulation, or other rule of law, a signature, contract, or other record may not be denied legal effect, validity, or enforceability solely because it is in electronic form, and a contract may not be denied legal effect, validity, or enforceability because an electronic signature or record was used in its formation.24 For example, a contract may meet a statute-of-frauds requirement and be legally binding even if it is based on email communications.

Consumer Banking and Payments Law: 1.2.1 Overview

Recent years have witnessed unprecedented innovations in forms of payments, while applicable law has struggled to keep up. Some forms of payment are loosely and unevenly regulated. Some transactions that are identical from the consumer’s perspective are in fact regulated by entirely different sets of laws.

Consumer Banking and Payments Law: 19(d) Agreements for All Open Accounts

1. Requirement applies to all open accounts. The requirement to provide access to prepaid account agreements under § 1005.19(d) applies to all open prepaid accounts. For example, an issuer that is not required to post agreements on its Web site because it qualifies for the de minimis exception under § 1005.19(b)(4) would still be required to provide consumers with access to their specific agreements under § 1005.19(d).

Consumer Banking and Payments Law: 1005.20(a)-1 to -5

1. Form of card, code, or device. Section 1005.20 applies to any card, code, or other device that meets one of the definitions in §§ 1005.20(a)(1) through (a)(3) (and is not otherwise excluded by § 1005.20(b)), even if it is not issued in card form. Section 1005.20 applies, for example, to an account number or bar code that can be used to access underlying funds.

Consumer Banking and Payments Law: 20(a)(2) Store Gift Card

1. Relationship between “gift certificate” and “store gift card.” The term “store gift card” in § 1005.20(a)(2) includes “gift certificate” as defined in § 1005.20(a)(1). For example, a numeric or alphanumeric code representing a specified dollar amount or value that is electronically sent to a consumer as a gift which can be redeemed or exchanged by the recipient to obtain goods or services may be both a “gift certificate” and a “store gift card” if the specified amount or value cannot be increased.

Consumer Banking and Payments Law: 20(a)(3) General-Use Prepaid Card

1. Redeemable upon presentation at multiple, unaffiliated merchants. A card, code, or other device is redeemable upon presentation at multiple, unaffiliated merchants if, for example, such merchants agree to honor the card, code, or device if it bears the mark, logo, or brand of a payment network, pursuant to the rules of the payment network.

Consumer Banking and Payments Law: 20(a)(4) Loyalty, Award, or Promotional Gift Card

1. Examples of loyalty, award, or promotional programs. Examples of loyalty, award, or promotional programs under § 1005.20(a)(4) include, but are not limited to:

i. Consumer retention programs operated or administered by a merchant or other person that provide to consumers cards or coupons redeemable for or towards goods or services or other monetary value as a reward for purchases made or for visits to the participating merchant.

Consumer Banking and Payments Law: 20(a)(7) Activity

1. Activity. Under § 1005.20(a)(7), any action that results in an increase or decrease of the funds underlying a gift certificate, store gift card, or general-use prepaid card, other than the imposition of a fee, or an adjustment due to an error or a reversal of a prior transaction, constitutes activity for purposes of § 1005.20. For example, the purchase and activation of a certificate or card, the use of the certificate or card to purchase a good or service, or the reloading of funds onto a store gift card or general-use prepaid card constitutes activity.

Consumer Banking and Payments Law: 20(b) Exclusions

1. Application of exclusion. A card, code, or other device is excluded from the definition of “gift certificate,” “store gift card,” or “general-use prepaid card” if it meets any of the exclusions in § 1005.20(b). An excluded card, code, or other device generally is not subject to any of the requirements of this section. See, however, § 1005.20(a)(4)(iii), requiring certain disclosures for loyalty, award, or promotional gift cards.

Consumer Banking and Payments Law: 20(c)(1) Clear and Conspicuous

1. Clear and conspicuous standard. All disclosures required by this section must be clear and conspicuous. Disclosures are clear and conspicuous for purposes of this section if they are readily understandable and, in the case of written and electronic disclosures, the location and type size are readily noticeable to consumers. Disclosures need not be located on the front of the certificate or card, except where otherwise required, to be considered clear and conspicuous.

Consumer Banking and Payments Law: 20(c)(2) Format

1. Electronic disclosures. Disclosures provided electronically pursuant to this section are not subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.). Electronic disclosures must be in a retainable form. For example, a person may satisfy the requirement if it provides an online disclosure in a format that is capable of being printed.

Consumer Banking and Payments Law: 20(c)(4) Disclosures on the Certificate or Card

1. Non-physical certificates and cards. If no physical certificate or card is issued, the disclosures required by this paragraph must be disclosed on the code, confirmation, or other written or electronic document provided to the consumer. For example, where a gift certificate or card is a code or confirmation that is provided to a consumer online or sent to a consumer’s email address, the required disclosures may be provided electronically on the same document as the code or confirmation.

Consumer Banking and Payments Law: 20(d) Prohibition on Imposition of Fees or Charges

1. One-year period. Section 1005.20(d) provides that a person may impose a dormancy, inactivity, or service fee only if there has been no activity with respect to a certificate or card for one year. The following examples illustrate this rule:

i. A certificate or card is purchased on January 15 of year one. If there has been no activity on the certificate or card since the certificate or card was purchased, a dormancy, inactivity, or service fee may be imposed on the certificate or card on January 15 of year two.

Consumer Banking and Payments Law: 20(e) Prohibition on Sale of Gift Certificates or Cards With Expiration Dates

1. Reasonable opportunity. Under § 1005.20(e)(1), no person may sell or issue a gift certificate, store gift card, or general-use prepaid card with an expiration date, unless there are policies and procedures in place to provide consumers with a reasonable opportunity to purchase a certificate or card with at least five years remaining until the certificate or card expiration date. Consumers are deemed to have a reasonable opportunity to purchase a certificate or card with at least five years remaining until the certificate or card expiration date if: