CUNA Regulatory Comment Call

January 21, 2003

The E-SIGN Act Does Not Cover Electronic Checks


Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to Associate General Counsel Mary Dunn at and to Assistant General Counsel Michelle Profit at; or mail them to Mary and Michelle in c/o CUNA’s Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, D.C. 20004-2601. You may also click here for a copy of this comment request.


Congress enacted the E-SIGN Act to validate and facilitate the use of electronic records and signatures and to remove uncertainty about the validity of contracts that are entered into electronically. However, the E-SIGN Act provides a number of exceptions. One of these exceptions is that the E-SIGN Act does not apply to Articles 3 and 4 of the UCC, which apply to checks.

The E-SIGN Act requires the Secretary of the Department of Commerce to review all of these exceptions 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 for this report, the Department of Commerce, through the National Telecommunications and Information Administration, is now soliciting comments with regard to the exception on UCC contracts and records.

The removal of Articles 3 and 4 of the UCC from the list of exceptions to the E-SIGN Act would apply to electronic negotiable instruments and would give depository institutions another means of processing checks electronically under check law.

In 2000, Articles 3 and 4 of the UCC were supposed to be revised to include electronic negotiable instruments, however, the revision of these articles did not address that issue. Currently, Congress is expected to reintroduce bills in this Congress that would allow for check truncation by allowing institutions to voluntarily exchange electronic checks or request a substitute paper copy. If that bill passes, it would be at least a year after passage before it would go into effect.


  1. How are you required by federal, state or local laws to process paper share drafts? Are you required by state or local laws to give the original written share draft to your member?

  2. Has the requirement to process paper share drafts instead of their electronic counterparts hampered your operations? Please explain.

  3. Should the treatment of electronic negotiable instruments be created in a general law like the E-SIGN Act by removing this restriction or should it be treated in specific banking laws like the bills on check truncation or UCC Articles 3 and 4?

  4. What protections will be available for your members if the exception is removed and the E-SIGN Act allows for the electronic delivery of checks?

  5. Would removal of the exception in E-SIGN to allow the processing of electronic negotiable instruments under checks law result in costs or benefits to your organization? Please explain.

  6. Do you support the current version of the E-SIGN Act that exempts Articles 3 and 4 of the UCC from its coverage?

    Please submit your address and phone number.

Eric Richard • General Counsel • (202) 508-6742 •
Mary Mitchell Dunn • SVP & Associate General Counsel • (202) 508-6736 •
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 •
Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 •