Topic: Electronic Signatures in Global and National Commerce Act (ESIGN)
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What is an appropriate record retention period for original medallion paperwork? Would you recommend the same retention period for virtual copies? We reached out to the Securities Transfer Agents Medallion Program (STAMP), and they stated: “Time of retention is a decision made by the institution itself in accord with your own legal, risk management and audit procedures.”
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We are not aware of any law that directly addresses the retention period for documents related to medallion signature guarantees, other than the SEC’s requirement that securities transfer agents retain records related to rejected transfers for three years following the date of rejection. That said, a medallion signature guarantee creates unique, direct liability on the…
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Can we email the required notice that must be sent under the Mortgage Escrow Account Act when a loan reaches 65% of the original loan balance and the borrower is entitled to terminate their escrow account? If the notice must be mailed, can it be included as a separate document with another mailing or periodic statement?
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Yes, when a borrower’s loan reaches 65% of their original loan balance and you have a valid email address on file, we believe you may use email to notify them of their right to terminate their escrow account. As a best practice, we recommend obtaining the borrower’s consent to receive electronic mail before sending any…
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We recently updated our deposit account terms and conditions. We are trying to avoid having to send our customers the entire document or a separate change in terms notice. Can we post the updated terms and conditions on our website with changes highlighted and include a message in our customer’s statements saying they can visit our website for the updated terms and conditions? The message also would say that customers can request a printed copy.
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It is unlikely that you will be able to fulfill your notice requirements by posting updated terms and conditions on your website if your updated deposit account terms affect any of the notice requirements under Regulation CC, Regulation E, Regulation DD, or Regulation P. These regulations do allow electronic disclosure if certain requirements are met,…
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If we advertise a checking account as “free” and list “free eStatements” as a feature, may we charge a customer if they request paper statements?
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No, we do not believe that you may charge a monthly fee for paper statements while advertising an account as “free.” There may be potential pitfalls even if you intend to charge the fee only occasionally, including risking an unfair, deceptive, or abusive act or practice (UDAAP) finding. Regulation DD prohibits an advertisement from referring…
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Are e-signed loan documents valid and enforceable if they are signed after the date entered on the note or signed with a name other than the borrower’s full legal name? For example, a borrower electronically signs a note dated October 25 on October 26, or a note referencing a borrower named “Jonathan Doe” is electronically signed with the name “John Doe.”
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Electronic signatures generally are valid on most loan documents in Illinois, and we do not believe that signing a document after its stated date or with a shortened version of the borrower’s full legal name would invalidate the document. However, special requirements apply to electronic promissory notes that are negotiable instruments, as discussed in more…
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What disclosures are we required to make available on our bank’s website?
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Below is a non-exhaustive list of the disclosures and notices that you may choose to post or may be required to post on your bank’s website. This list may be incomplete depending on the products and services you offer or advertise on your website, some of which may trigger additional disclosure requirements. Privacy Notices The…
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More of our business customers are using electronic signatures when signing their paper checks. In the past, for facsimile signatures, we have had our business customers stamp the signature card and the resolution authorizing us to accept the facsimile signature with the actual facsimile stamp. What are we supposed to do for electronic signatures?
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We recommend including customers’ electronic signatures on their signature cards and resolutions authorizing you to accept electronic signatures. We also recommend reviewing your account agreements to ensure that they allow you to charge your customers for checks that they have signed electronically. Under the Illinois Uniform Commercial Code (UCC), banks may charge their customers for…
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If a mortgage loan applicant is scheduled to come into the bank to receive and sign their Loan Estimate (LE) on the third business day after we received their application — but is unable to do so because the bank is closed due to inclement weather — can the LE be signed on the following business day, or is the date of the closure for inclement weather considered a “business day” for purposes of the LE deadline? Should we mail the LE as a precaution instead of planning to hand deliver the LE?
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No, we do not believe a day on which your bank closes due to inclement weather would be considered a “business day” for purposes of delivering the LE — provided your bank ceases to carry out substantially all of its business functions on that day. Whether to mail or hand deliver the LE to a…
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I have been asked to prepare an e-signature policy for our bank. Should we be referencing the E-SIGN Act, and what else should we be referencing?
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We have requested a sample e-signature policy or procedures from members of the IBA’s Compliance Division Advisory Committee. We have not yet heard back from any committee members but will let you know as soon as we do. One committee member advised against adopting an e-signature policy — unless an examiner has asked your institution…
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We are considering moving from paper loan files to scanned loan files on our core system. Besides the original promissory note and security agreement, what other loan documents should we keep in paper form?
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Generally, you do not need to retain hard copies of documents that have been scanned electronically, but there are important exceptions to this general rule. We do not recommend shredding originals of certain negotiable instruments, including documents that qualify as notes under Article 3 of the Uniform Commercial Code (UCC) — such as negotiable mortgage…