This content was published prior to the combination of Dentons Sirote. Learn more about Dentons Sirote. 

I wrote a blog about doing business electronically last year. See the blog here. I want to revisit this issue with you because of the COVID-19 Pandemic, and the impact it is having on obtaining “wet” signatures on promissory notes and contracts.

If I do say so myself, my blog was prescient in the sense that it discussed and questioned the continuing need for physical offices for traditional installment lenders.

We know that we can transact business remotely via electronic commerce. That is, we can enter into binding contracts, remit loan proceeds, and take payments without ever coming face-to-face with our customers. This isn’t to say that this is a preferable method of doing business. Most certainly, it is not.  This is to say that it can be done and is being done.

That March 2019 blog talked about how to conduct electronic transactions. There seems to be little left to question about doing that. 

I want to focus here on the issue of how we make our lenders—those to whom we look for financing our accounts receivable—comfortable that our loans and thus their collateral, are safe and secure. After all, the “Golden Rule” in business  (“He who has the gold makes the rules.”) comes into play here.

Lenders to the consumer finance industry are modifying their loan agreements to better describe what constitutes “eligible” collateral. Traditionally, only notes with “wet” signatures qualified. Now, lenders are acknowledging that notes with electronic signatures qualify as well so long as regulators recognize the legitimacy of the contract E-signatures. The language that is being adopted requires that electronic signatures comply with applicable state regulatory requirements.

It will be helpful if regulators will issue opinions that back-up the common understanding that consumer notes and contracts that are authenticated in the manner required by the federal E-Sign law and the various state Uniform Electronic Transactions Acts, are indeed enforceable obligations of the consumers. This would go a long way to making lenders and their lawyers more comfortable with electronic signatures.