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Online contracts bill wins approval Legislation expected to boost e-commerce 06/17/2000 By Doug Bedell / The Dallas Morning News It may be some time before consumers can sign mortgages online, but a new law going into effect this fall may provide an immediate boost to businesses moving transactions to the Internet. The Senate unanimously passed a bill Friday allowing consumers and businesses to sign contracts online with a click of a mouse. The measure easily cleared the House on Wednesday, and President Clinton said he would sign it. By giving electronic signatures the legal weight of paper signatures, the new law would give consumers the opportunity to buy health insurance, complete bank loans or set up brokerage accounts over the Internet, around the clock and with no delay. Boosters hailed the bill as a time- and money-saver that will be a boon to e-commerce. Some privacy groups, meanwhile, worried that the bill's lack of technical specifications leave poorly constructed electronic transactions open to fraud, hackers and other abuse. Bill Brice, founder and chief executive of AlphaTrust.com in Dallas, said the bill simply gives digital signatures the same weight as those issued by pen and ink for binding legal transactions. "You're not going to see consumer house-closings online for a long time," Mr. Brice said Friday, but businesses may soon begin exchanging digitally signed purchase orders, contracts and other documents with increasing regularity, he said. The bill does not specify how individuals or businesses should embark on signed digital transactions, only that they must agree on the process before any transaction takes place. The law goes into effect Oct. 1, and consumers could start taking advantage of the new law soon afterward. Mr. Brice warns the immediate result of the bill could be greater confusion, as firms with no track record vie to offer electronic signature technology for the exploding e-commerce market. The bill does help protect the millions of people who do not have access to the Internet or who worry about being defrauded in cyberspace. It would enable consumers to choose whether to do business online or on paper. And banks would be required to verify that consumers could receive documents and information online by exchanging e-mail with them. In addition, certain sensitive legal documents and procedures couldn't be done electronically. For example, insurance and utility companies must still send cancellation and termination notices through the mail, wills cannot be executed over the Internet, and products may not be recalled online. Mortgages, too, must be foreclosed on paper. For its part, AlphaTrust has been working since late last year to develop a secure system backed by up to $250,000 in guarantees. With it, Mr. Brice says, those exchanging e-mail agreements and other documents can be assured of each other's identities. AlphaTrust, VeriSign and many other companies are developing systems for encrypted, secure transactions. Said Mr. Brice: "We've taken the technology and answered the questions that consumers would have in light of the bill: What happens if my signature is stolen? Who is liable if there is fraud? "We've developed a very robust and secure way to use signatures using cryptography and other reliable methods." But members of several privacy groups fret that the bill is a blind endorsement of e-commerce without providing protections for consumers. Lauren Weinstein, co-founder of People for Internet Responsibility, called the bill "a blueprint for consumer nightmares." A lack of minimum standards may permit purloined digital signatures to be used to defraud consumers. "The way it stands now, as I read it, someone could have their house fraudulently mortgaged by another person and it could all be done electronically," Mr. Weinstein said. "Nothing would be required to be mailed to the actual homeowner right up to the point where they foreclose on it." In fact, simply clicking a Web site box labeled "I Accept" would constitute a legally binding transaction under the bill, he said. "This is just a disaster waiting to happen," Mr. Weinstein said. "It just shows the total lack of understanding floating around Washington." At the same time politicians are discussing the lack of Internet security from hacker attacks, Mr. Weinstein said, it has passed a bill that opens doors to even more damaging abuses. "The lawyers are going to have a field day," Mr. Weinstein said. "They're going to have to come back later and try to untangle all these electronic messes. It's going to be a bonanza for some people." In the end, the logjam was broken – a testament, in part, to Congress' enthusiasm about the Internet and the economic boom it has created. The Senate passed the measure Friday by a vote of 87-0. The House approved it, 426-4. The New York Times News Service contributed to this report. |
