In the year 2000, Tiger Woods became the youngest golfer to win a career Grand Slam, the original Mini ceased production, and the U.S. passed the E-Sign Act (Electronic Signatures in Global and National Commerce) ensuring that electronic signatures can be valid and legally binding.
Even though 19 years have passed since then, confusion about the legality of eSignatures remains. In this post, we’re going to work on clearing up some of the common misconceptions around electronic signatures.
Federal Laws Regarding eSignatures
The E-Sign Act states that a contract or signature, “may not be denied legal effect, validity, or enforceability solely because it is in electronic form”. Basically, the E-Sign Act gives eContracts and eSignatures the same legal standing as paper records. It also says that electronic records count as information “provided in writing,” as long as a consumer agrees to conduct their transaction using electronic means.
The E-Sign Act also requires lenders to keep accurate and complete electronic records that can be accessed and reproduced as needed by people who are authorized to access them.
You can click here to read the E-Sign Act if you want to know exactly how it’s stated.
In 2010, provisions of the Uniform Electronic Transactions Act (UETA) helped ensure that each state aligned on recognizing the legality of electronic contracts for business and commercial transactions. Illinois, New York and Washington have not adopted UETA, but they each have laws recognizing electronic signatures for lenders.
But What About California?
When California adopted UETA, it made an exception for auto signing. However, California later adopted E-Sign, which supersedes UETA. There is a 2017 bill in the assembly in California designed to clarify that this exception under UETA is null and void.
Currently, every major provider and lender includes California in their eContracting platform.
Please consult your lawyer if you have doubts or questions about the legality of eSigning in your state.
What Are the Advantages of eSigning?
Giving electronic contracts and signatures the same legal status as their paper counterparts offers significant benefits for dealers, customers and lenders:
- Accuracy – eContracting helps ensure that contracts are complete and more accurate before the customer signs and the dealer submits them to the lender. It also helps eliminate missing signatures, which is one of the top reasons that funding packages are returned as incomplete and subject to re-contracting.
- Compliance – With the system flagging any potential issues, a dealership can be more confident that each contract is compliant with state and federal consumer protection regulations. Customers are protected by a documented process that ensures they know what they’re signing before they sign and that they’ve provided affirmative consent to complete their transaction electronically.
- Customer Satisfaction – The ability to review and sign documents electronically greatly enhances the customer experience. Rather than flipping through dozens of pages one-at-a-time, eSigning offers customers the ability to seamlessly and efficiently move through the car buying process. 2019 Cox Automotive Car Buyer Journey research shows that 47% of a customer’s car purchase time is spent negotiating and signing paperwork, making paperwork a buyer’s number one frustration with the car buying process. Handling the contract review and signing digitally can cut 45 minutes from the process, which can help to preserve the dealership’s CSI score and improve customer loyalty.
- Faster Funding – The lender receives data that has already been checked for accuracy directly into their loan origination system (LOS), which not only maximizes data security but allows for loans to be processed and funded more quickly.
How Widespread is eSigning?
Industry-wide, lenders have purchased, securitized and funded billions of dollars in eSigned retail and lease contracts to date in all 50 states.
Are All eSignatures the Same?
Dealertrack eSignatures are accepted by all major lenders participating in eContracting on our platform in every state. In addition, there are aspects of our technology and signing process that help ensure eSignature authenticity and provide the authoritative copy of each contract in ways that some other providers do not. We can also offer a better customer experience with “tap and sign” functionality that allows buyers to sign one time per signing session and have all subsequent signatures pre-fill with just a tap.
If you’d like to learn more about the advantages of Digital Contracting on Dealertrack uniFI, please click to request a demo.