"We urge the Clinton Administration and the Congress
to face this issue head on. There is no good reason to deny consumers the benefit of
on-line financial services, which will be available twenty-four hours a day, seven days a
week," said King.
"We are concerned that some are urging that consumer
financial services be carved out of the digital commerce legislation because some
consumers do not yet have computers and may not be able to access this service,"
noted Catherine Valentine, general counsel of Intuit, Inc. and vice president of the
Council.
"Access to the Internet is expanding more rapidly
than any technology in recent history. Denying access to financial services on-line to
those who currently have computers will not help to eliminate the 'digital divide', which
some are citing as a reason not to move forward with this legislation. Indeed, passage of
this legislation will empower consumers in all segments of society, in rural areas and
inner cities, to secure financial services on-line. This legislation is a must, and we
urge the Congress to pass it," said Valentine.
For further discussion see attached memo.
The Electronic Financial Services Council represents a
group of financial services and software companies that offer their products and services
over the Internet. The Council's mission is to update laws and regulations to facilitate
the electronic delivery of financial services. Members include: Countrywide Home Loans,
Inc., Intuit Inc., GE Capital Mortgage, Microsoft Corporation, Cendant Mortgage, Chase
Manhattan Mortgage, Citigroup Mortgage, Inc., E-Loan, The First American Financial
Corporation, Freddie Mac, GMAC Mortgage Corporation, Lender Services, Inc., Lending Tree,
The Principal Financial Group, United Guaranty, Wells Fargo/Norwest. For additional
information, see http://www.efscouncil.org.
CONSUMERS WILL BENEFIT FROM
FEDERAL ELECTRONIC COMMERCE STANDARDS
Legislation reported by the House and Senate Commerce
Committees, H.R. 1714 and S. 761, provide important and needed national standards which
will permit consumers to contract electronically for financial services, to receive
related state and federal disclosures online, and to obtain electronic records of their
financial transactions.
Access to computers and the Internet is already
significant and is rising in virtually every segment of the population. Consumers are
increasingly turning to the Internet for financial products. A recent study by Forrester
Research predicts that the number of households accessing financial services online will
grow from 3.3 million current users to 20.9 million users in the next four years. Well
over half of the California homeowners looking to refinance use the Internet to compare
products and prices.
Electronic media will make it possible for consumer
disclosures, records and other information to be provided faster, at a more cost effective
rate, and in a more user friendly way than is possible in static paper formats. Increased
use of the Internet will give smaller financial institutions equal access to a national
marketplace and will empower consumers by providing enhanced product information and
access to a broader and more competitive credit marketplace. Online disclosures which
facilitate the delivery of financial services and products electronically will provide
consumers with significant benefits:
- Convenience and time-saving. Consumers can conduct
transactions virtually anywhere and at any time, 7-days-a-week, 24-hours-a-day. With
disclosures being delivered over the world wide web or e-mail, consumers will be able to
access the web page or their e-mail account from any computer with standard Internet
capabilities.
- Clarity of electronic disclosures. Financial
services firms are required by law and regulation to disclose large amounts of
information. Electronic records can be organized in a clearer, more rational manner than
traditional paper-based disclosures. For example, electronic disclosures containing links
to defined terms could make current consumer disclosures more understandable to consumers.
Electronic disclosures will also allow consumers to search documents for key words using
browsers and other technology. In addition, electronic storage of important disclosures,
such as those for mortgages, will provide customers with more easily accessable records.
- More timely and meaningful disclosures. Electronic
delivery of consumer notices, contracts, and disclosures will only enhance the
effectiveness of existing consumer protection statutes by causing them to be provided in
real time in a format that is far more user-friendly than the current stack of papers
received by mail days after an application has been filed.
- Enhanced access for under-served persons and
communities. People living in under-served communities, both urban and rural, will
have enhanced access to financial products and services offered over the Internet, even
where brick and mortar branches are not available. Libraries and schools can provide
access to computers and the Internet for an increasing number of urban and rural
residents. As computer prices continue to drop rapidly, greater numbers of household will
gain access to the Internet. Highly publicized efforts to provide lower cost, even free,
Internet access will further hasten this trend. Moreover, this increased access should
result in lower cost financial services for all consumers, as it is easier for consumers
(regardless of location) to use the Internet to compare fees and services offered.
- Lower cost. Provision of electronic disclosures will
reduce costs of delivery of financial services, and marketplace competition will result in
savings for consumers. For example, it is projected that consumers who start and complete
their loan applications over the Internet could save up to a quarter point in origination
costs on a mortgage because of the lower overhead and hedging costs facing lenders.
- Substantive consumer protection laws would not be
changed. The delivery of federal or state disclosures electronically will not in any
way change the rights or responsibilities of any party or affect the content of any
disclosure.
QUESTIONS AND ANSWERS ON THE BENEFITS OF ELECTRONIC
COMMERCE
Some have questioned whether Congress should permit
consumers the option of contracting to receive financial services and related disclosures
electronically. These arguments against giving consumers this choice fall under the
following headings:
- Digital Divide. It is argued that those who have
computers are generally better off than those who do not and that any action taken to
enhance availability of services for those who have computers effectively disadvantages
those who do not.
Response: Availability of computers and access to
the Internet is rapidly expanding to all segments of society. Indeed, the spread of this
technology is out pacing all prior technological innovations. This will be hastened by the
introduction of new access devices and the increased availability of free Internet
service. As with any technology, some earlier adopters of technology will enjoy the
benefits before others, but their use of these technologies pave the way for wider
availability to all segments of society. Indeed the earlier adopters of a new technology
may pay more for the new technology or service until mass production and further
innovation ultimately bring down the cost for all users. Should the FCC have denied use of
the airwaves to those who bought the first TV's because everyone didn't own one right
away?
- Retainability of Disclosures. Concerns have been
expressed that consumers will not have the ability to receive, retain, and print
electronic records.
Response: There appears to be a mistaken notion
that electronic records do not have the "permanence" of paper records. Not only
is this not true, the opposite is likely true. Electronic records can be retained in a
much better manner than paper records. Electronic records can be stored, catalogued, and
retrieved much more quickly and much more effectively than papers stored in a lender's
warehouse or a consumer's file cabinet. Further, most electronic records can be printed on
paper and stored in the same manner that such records are held today.
In addition, nothing in the proposed legislation requires
consumers to receive disclosures electronically. Both federal and state consumer
protection statutes require disclosures to be provided in a format that the consumer may
keep. This legislation does not alter these requirements. Consumers that elect to do
business online should recognize their ability to receive, retain, and print electronic
records. Moreover, consumers who are unable, for whatever reason, to receive or retain
documents related to the transaction conducted online, will be able to elect not to do
business with a service provider online. Therefore, it is in the industry's best interest
legally and economically to ensure that the consumer receives necessary documentation.
- Integrity of Documents. Concerns have been expressed
that disclosures provided electronically could be subject to alteration and could make
them difficult to use in court.
Response: The current rules of evidence governing
authentication of documents would be applied in the electronic medium. For example, if a
consumer challenges the authenticity of a paper document, the burden of proof is shifted
to the person who is asserting the authenticity of the document. The same would be true
with respect to electronic records. Proposals for a self-authenticating record would
create additional administrative requirements that are not currently necessary for paper
documents and without improving the reliability of the electronic record.
Electronic commerce is "interstate commerce" in
the truest sense of the term; the Internet is a borderless medium. Federal legislation
should include strong language to promote uniformity and consistency in electronic records
and notices. We urge Congress to move forward with confidence that access to electronic
disclosures will empower and inform consumers who are increasingly choosing to use the
Internet to access financial services.