CUNA Comment Letter

E-Sign Exception for Housing Foreclosure, Repossession, and Default Notices

January 31, 2003

Josephine Scarlett
Senior Attorney
National Telecommunications and Information Administration
14th Street and Constitution Avenue, NW
Washington, D.C. 20230

Re: The Housing Foreclosure, Repossession, and Default Notices Exception to the Electronic Signatures in Global and National Commerce Act (E-Sign Act)

Dear Ms. Scarlett:

The Credit Union National Association (CUNA) appreciates the opportunity to comment on the issue of whether the housing foreclosure, repossession, and default notices exception to the E-Sign Act should continue. CUNA represents more than 90 percent of our nation’s 10,000 state and federal credit unions. This letter reflects the views of our member credit unions and of CUNA's Consumer Protection Subcommittee, chaired by Kris Mecham, CEO of Deseret First Credit Union, Salt Lake City, Utah.

The E-SIGN Act validates and facilitates the use of electronic records and signatures and removes uncertainty about the validity of contracts that are entered into electronically. One exception is that the E-SIGN Act does not apply to notices of default, acceleration, repossession, foreclosure, or eviction with regard to an individual’s primary residence.

The E-SIGN Act also requires the Secretary of the Department of Commerce to review this and the other exceptions to the E-Sign Act and to issue a report to Congress by June 30, 2003 that evaluates whether these exceptions continue to be necessary in order to protect consumers. In preparation of this report, we appreciate the initiative of the Department of Commerce, through the National Telecommunications and Information Administration, to solicit public comment regarding the exception for residential default, foreclosure, and eviction notices.

Summary of CUNA’s Position

CUNA supports efforts to encourage electronic commerce, including the delivery of electronic disclosures and other notices. We also believe that the E-Sign Act exception for residential default and foreclosure notices should only be removed if adequate consumer protections are maintained. The negative consequence of not receiving a residential default or foreclosure notice, which would be the potential loss of the home, is potentially greater to a consumer than the consequence of not receiving other types of disclosures. Also, credit unions’ current ability to provide mortgages electronically has not been hampered by this exception with regard to these notices.

Certain state laws require that default and foreclosure notices be delivered by certified or registered mail. This delivery method enables a creditor to verify that a notice was delivered to the debtor’s address, which provides assurance that the debtor actually received the notice.

While the E-Sign Act does not prescribe a particular technology for delivering electronic notices, many creditors rely on traditional e-mail to communicate electronically. At this time, we do not believe that traditional e-mail can provide the same assurances of delivery that is now provided by certified or registered mail. Traditional e-mail does not consistently afford the sender of the e-mail with the ability to confirm that the e-mail was delivered. Without sufficient proof of delivery, we believe that the use of e-mail at this time reduces consumer protection and is, therefore, inadequate.

However, adequate proof of delivery may be available through other electronic mail delivery channels. For example, a number of credit unions have the ability to provide their members with access to a personal electronic mailbox within the credit union’s Internet website. Under this scenario, the credit union has the ability to deliver an electronic notice to this mailbox and confirm whether the member opened the notice.

We believe that this type of delivery verification may be the electronic equivalent of certified or registered mail and believe that this may be the preferred method of sending default and foreclosure notices if such electronic notices are permitted in the future. However, we recognize that this method should only be used when the member consents to receiving such notices electronically and has demonstrated his or her ability to receive electronic messages through a designated electronic mailbox within the creditor’s website.

We recognize that as technology evolves, the ability to provide mortgages electronically may eventually be hampered if creditors are unable to deliver default or foreclosure notices electronically. At that time, it may be appropriate to revisit this issue and consider removing this exception to the E-Sign Act.

Thank you for the opportunity to comment on the issue of whether the housing foreclosure, repossession, and default notices exception to the E-Sign Act should continue. If you or other staff have questions about our comments, please give Associate General Counsel Mary Dunn or me a call at 1-800-356-9655.

Jeffrey Bloch
Assistant General Counsel