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HOT TOPICS
2017
MEMBERSHIP
DIRECTORY
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the cosigner becomes obligated on the agreement. A “cosigner” is different from a co-buyer, co-borrower, or co-
applicant because a cosigner receives no tangible benefit from the agreement, but undertakes liability as a favor
to the main debtor who would not otherwise qualify for credit. On the other hand, a co-buyer (one who shares in
the purchased goods), a co-borrower (one who shares in the loan proceeds), or a co-applicant do receive benefits.
Therefore, they are not considered cosigners under the Rule, and you are not required to provide the cosigner notice
to them. A classic example of a cosigner is a parent cosigning for their child’s credit obligation. Many states have
additional requirements for cosigner notices so check with your local attorney on the co-signer notice required in
your state. Recall that when two applicants for credit apply for financing, they are required to indicate on the credit
application whether or not they intend to apply for joint credit.
Electronic Signatures and Records
The federal Electronic Signatures in Global and National Commerce Act (the “ESIGN Act”) and the state-adopted
Uniform Electronic Transactions Act (“UETA”) were enacted to resolve uncertainty about whether electronic
documents and signatures are as valid as paper ones. Both acts provide that electronic records and signatures have
the same legal status as ink signatures and paper records. Under both, an “electronic record” is information “that
is stored in an electronic or other medium and is retrievable in perceivable form” and an “electronic signature”
is “an electronic sound, symbol, or process, attached to or logically associated with a contract or other record
and executed or adopted by a person with the intent to sign the record.” Neither act changes the disclosure or
content requirements for documents under other law. The ESIGN Act requires that consumers specifically consent
to receiving disclosures that are required to be “in writing” electronically and provides specific requirements for
obtaining such consent. Alternatively, one can provide such disclosures in paper form and avoid the consent
procedure imposed by the ESIGN Act.
Please note that because of limitations in their scope, the ESIGN Act and UETA do not alter the documentation and
signature requirements of Uniform Commercial Code Article 9, which provides the requirements for the customer
to grant the creditor a security interest in the vehicle sold. Fortunately, Article 9 permits the use of electronic
records and signatures to grant a security interest in substantially the same way as the ESIGN Act and UETA would.
So the electronic records and signatures used in the customer’s financing contract that satisfy the ESIGN Act and
UETA requirements will also satisfy the Article 9 requirements for the contract.
As a result, a consumer’s digital signature on an electronic signature pad linked to an electronic document or their
digital signature on a tablet used to provide the documents has the same legal effect as their ink signature on a
paper document. A click-through to a website can also be an electronic signature. The electronic document can
be stored in an electronic filing cabinet or vault and should be retained for a period of time equal to the retention
period for a paper version of the same document. Under TILA, the consumer must receive a copy of the disclosures
that the consumer can keep prior to the consummation of the transaction. See more in Chapter 12: Recordkeeping
and Destruction of Records.
Servicemembers Civil Relief Act (SCRA)
Formerly called the Soldiers and Sailors Civil Relief Act, this law imposes a 6-percent rate cap on pre-existing
secured credit, including vehicle credit sale or a loan, during the period of military service. These provisions apply
to both the person inmilitary service and their dependents with respect to obligations entered into by such persons