Before breaking for a holiday recess earlier this month, Congress passed two bills that aim to make digital signatures just as binding as their paper-based counterparts.
Overall, the industry has applauded this latest federal effort to recognize digital signatures and to spur the digital marketplace. Yet the move is considered a belated one that lags behind the reality of the electronic-commerce landscape and individual states' efforts to legally incorporate digital signatures, sources said.
There are also serious differences between the Senate and House versions of pending legislation. Lawmakers will have to settle those concerns in committee when they return next January.
The Senate bill - called the Third Millennium Electronic Commerce Act - and the House bill - the Electronic Signatures in Global and National Commerce Act - are intended to remove any legal discrimination against those transactions or contracts that rely on digital signatures.
And both bills vow to let "free market forces" rather than the government prescribe technology for safeguarding digitally signed contracts.
But the two bills differ in the types of documents that each would cover. Specifically, the Senate bill would allow a digital signature to stand in the place of a traditional signature only on contracts.
The House bill, however, covers other types of records. In a transaction between a brokerage firm and a consumer, the parties could electronically conduct other business surrounding a contract. The consumer, for example, could receive year-end tax statements and sign a power of attorney document with no accompanying paperwork.
Because the House bill is so much broader, it is wildly unpopular with citizens groups - which has led to speculation that the White House might veto the bill. The Clinton administration could not be reached for comment.
"These bills should be limited to electronic transactions," said Margot Saunders, a managing attorney at the National Consumer Law Center in Washington.
"The Senate bill does just what these bills should both be trying to do - and no more. It says that full rights of a contract should not be denied just because it has been entered into with an electronic signature," Saunders said.
Saunders warned that the House bill could leave consumers high and dry if transactions turn sour. She pointed to cases in which a bank could foreclose on a home because the buyer had not checked his or her e-mail for notices.
The House bill is also more politically charged because it aims to unify state digital signature efforts.
"We wanted to have a uniform nationwide standard for use and acceptance of electronic signatures," said a House source.
More than 40 states now have some form of digital signature laws on their books.
Many point to that figure as proof that the e-commerce market has matured - perhaps beyond the current set of federal bills now on the table.
"Because of market demands being driven by e-commerce, there has been a real groundswell around digital signature legislation," said Barclay Blair, an industry relations expert at UWI.com, a Concord, Calif.-based provider of Extensible Markup Language Internet forms that are designed to secure business-to-business transactions.
Although the lack of a federal statute has not stymied the market, most observers agreed that the need for legislation exists.
"Everyone recognizes that we don't want a Balkanized marketplace for electronic commerce. You do have to have this framework for [the industry] to continue to grow," said Bob Cohen, vice president of the Information Technology Association of America's software division, in Arlington, Va.
This story from Infoworld.com Copyright © 1999 InfoWorld Media Group, Inc.
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