ComplianceFinanceApril 07, 2020

E-Sign law turns 20 – digital lending has come a long way

June 30 marks the 20th anniversary of E-Sign, the US National E-Sign Act, eSigned by former President Bill Clinton in 2000, which declared paper signatures and records and electronic signatures and records are equal under federal law. For two decades, the ESIGN Act has been the legal foundation for the electronic execution of trusted, enforceable digital contracts and loans by businesses and consumers enabling an expanded digital economy.

eOriginal assisted in creating the UETA (Uniform Electronic Transactions Act), the UCC Model Law which enabled states to adopt electronic documents and electronic signatures to be used with the same effect as paper documents and ink signatures. The ESIGN Act created the national utilization of the primary elements UETA and added additional consumer protections.

Here is a Quick Look Back in History:

  • Early 2000s – Laws such as UETA, E-Sign and UCC 9-105 were enacted, and the automotive digital lending industry goes digital with adoption of eSignature and the first rated digital securitization
  • 2015 – Marketplace lenders (MPLs) such as So-Fi, Lending Club and others enter the market with a digital-first perspective
  • 2017 – Digital mortgage adoption begins – Quicken, Fannie Mae and Freddie Mac each implement digital loan platforms for origination and movement of digital loan assets into the secondary market
  • 2018 –Tesla, Carvana, and CarMax enable digital eContracting and delivery through remote, contactless car sales
  • 2019 – eOriginal processes more than 13M annual digital loan transactions; Fannie Mae reports that 66% of borrowers are interested in a fully digital process; MPLs capture 60% of the personal loan market

For 20 years, the ESIGN Act has been the legal foundation for the electronic execution in an expanding digital economy. Withstanding the test of time, the ESIGN Act has served the judiciary, business, consumers, and the evolution of technology.

Where We’re Going

Flash forward, we’ll see digital lending continue to grow. In fact, the global digital lending platform market size is expected to reach USD 15.3 billion by 2026, according to a recent report.

The ESIGN Act has enabled businesses and consumers to have trusted, enforceable contracts and loans in a fully digital, remote environment. It has been an accelerant for digital adoption, providing for the speed, reduced costs and efficiencies of digital transactions, as well as the ease of the digital consumer experience expected today. With the COVID-19 pandemic and its need for contactless social distancing, there has never been a greater need for purpose-built, remote and contactless digital lending requiring solutions that combine eSignature and eVault to fully meet digital compliance standards.

It was unimaginable 20 years ago to predict the state of the world we’re in today. Fortunately for all, ESIGN and UETA have enabled the lending economy to thrive despite difficult conditions. We’re grateful for the vision of these laws which have enabled the remote transaction environment critical to maintaining and growing our economy as well as protecting our health and lives. We anticipate accelerated, creative utilization of digital transactions leveraging these foundational statutes to expand an innovative digital economy for the benefit of all.

Click here for the infographic.

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