[Code of Federal Regulations]
[Title 12, Volume 6]
[Revised as of January 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 12CFR609.910]

[Page 49-50]
 
                       TITLE 12--BANKS AND BANKING
 
                 CHAPTER VI--FARM CREDIT ADMINISTRATION
 
PART 609_ELECTRONIC COMMERCE--Table of Contents
 
                         Subpart A_General Rules
 
Sec. 609.910  Compliance with the Electronic Signatures in Global and National Commerce Act (Public Law 106-229) (E-SIGN).

    (a) General. E-SIGN makes it easier to conduct E-commerce. With some 
exceptions, E-SIGN permits the use and establishes the legal validity of 
electronic contracts, electronic signatures, and records maintained in 
electronic rather than paper form. It governs transactions relating to 
the conduct of business, consumer, or commercial affairs between two or 
more persons. E-commerce is optional; all parties to a transaction must 
agree before it can be used.
    (b) Consumer transactions. E-SIGN contains extensive consumer 
disclosure provisions that apply whenever another consumer protection 
law, such as the Equal Credit Opportunity Act, requires the disclosure 
of information to a consumer in writing. Consumer means an individual 
who obtains, through a transaction, products or services, including 
credit, used primarily for personal, family, or household purposes. You 
must follow E-SIGN's specific procedures to make the required consumer 
disclosures electronically. E-SIGN's special disclosure rules for 
consumer transactions do not apply to business transactions. Under E-
SIGN, some System loans qualify as consumer transactions, while others 
are business transactions. You will need to distinguish between the two 
types of transactions to comply with E-SIGN.
    (c) Specific exceptions. E-SIGN does not permit electronic 
notification for notices of default, acceleration, repossession, 
foreclosure, eviction, or the right to cure, under a credit agreement 
secured by, or a rental agreement for, a person's primary residence. 
These notices require paper notification. The law also requires paper 
notification to cancel or terminate life insurance. Thus, System 
institutions cannot use electronic notification to deliver some notices 
that must be provided under part 614, subpart L of this chapter, Actions 
on Applications; Review of Credit Decisions, and part 614, subpart N of 
this chapter, Loan Servicing Requirements; State Agricultural Loan 
Mediation Programs; Right of First Refusal. In addition, E-SIGN does not 
apply to the writing or signature requirements imposed under the Uniform 
Commercial Code, other than sections 1-107 and 1-206 and Articles 2 and 
2A.

[[Page 50]]

    (d) Promissory notes. E-SIGN establishes special technological and 
business process standards for electronic promissory notes secured by 
real estate. To treat an electronic version of such a promissory note as 
the equivalent of a paper promissory note, you must conform to E-SIGN's 
detailed requirements for transferable records. A transferable record is 
an electronic record that:
    (1) Would be a note under Article 3 of the Uniform Commercial Code 
if the electronic record were in writing;
    (2) The issuer of the electronic record has expressly agreed is a 
transferable record; and
    (3) Relates to a loan secured by real property.
    (e) Effect on State and Federal law. E-SIGN preempts most State and 
Federal statutes or regulations, including the Farm Credit Act of 1971, 
as amended (Act), and its implementing regulations, that require 
contracts or other business, consumer, or commercial records to be 
written, signed, or in non-electronic form. Under E-SIGN, an electronic 
record or signature generally satisfies any provision of the Act, or its 
implementing regulations that requires such records and signatures to be 
written, signed, or in paper form. Therefore, unless an exception 
applies or a necessary condition under E-SIGN has not been met, an 
electronic record or signature satisfies any applicable provision of the 
Act or its implementing regulations.
    (f) Document integrity and signature authentication. Each System 
institution must verify the legitimacy of an E-commerce communication, 
transaction, or access request. Document integrity ensures that the same 
document is provided to all parties. Signature authentication proves the 
identities of all parties. The parties to the transaction may determine 
how to ensure document integrity and signature authentication.
    (g) Records retention. Each System institution may maintain all 
records electronically even if originally they were paper records. The 
stored electronic record must accurately reflect the information in the 
original record. The electronic record must be accessible and capable of 
being reproduced by all persons entitled by law or regulations to review 
the original record.