CFPB Acknowledges Legacy eSign Gaps (And Ways to Address Them)

The coronavirus pandemic and subsequent economic fallout has forced banks to process an influx of defaulted loans, as well as new loans, deferments, modifications, and other forms of relief. The CFPB recently announced that banks will no longer be required to collect eSignatures during certain calls with customers. Instead, verbal consent will suffice. This came in light of the CFPB’s findings that eSignatures are actually prolonging and complicating time-sensitive processes in today’s high-stakes sensitive business environment. Yet while legacy eSignatures that depend on computer and email access are in fact inefficient, newer eSignature solutions can actually be used to enhance the customer experience — while ensuring the necessary level of compliance. With such solutions, compliance and efficiency will no longer be at odds, thus fulfilling the original promise of eSignatures.

The weaknesses of legacy eSignatures

eSignatures came into existence to make it easier for businesses to collect consent, while maintaining compliance. Yet they are themselves far from frictionless. As the CFPB pointed out in its statement, obtaining eSignature consent during a phone call typically requires a consumer to sit in front of a computer, and click a link in an email to electronically sign a document. This may have been sufficient a decade ago, when customers were mostly in front of their office computers or home workstations. Yet today’s customers are on the go with their mobile phones. Here’s why it’s a problem: Asking today’s customers to complete legacy eSignature processes while on a call requires the consumer to bounce from the primary channel (the cell phone) to a secondary channel (the computer) without dropping the call. This is a problem for agents working with mobile consumers who don’t always have immediate computer access. As the CFPB notes about legacy, email-based eSignatures: Some firms have observed that obtaining E-Sign consent can result in longer telephone transactions, dropped or transferred calls, and additional calls. For example, an issuer’s normal practice for obtaining E-Sign consent during a phone call might be to have a consumer, on the consumer’s computer, click a link in an email sent from the issuer so that the consumer may provide consent. That may take time or cause disruption as the consumer shifts to another communications channel (the computer) without dropping the phone call. And if the consumer cannot access email during the phone call, the consumer would need to access the issuer’s email later, potentially requiring the consumer to call the issuer a second time to finish the transaction, thereby reentering a phone queue. Obtaining E-Sign consent may thus delay assistance to consumers seeking relief. During ordinary times, banks and regulators are less sensitive to issues of efficiency, and adhering to compliance takes precedence over all else. But with reduced staffing and greater consumer demand, a spotlight is shined on the shortcomings of legacy eSignatures.

The CFPB amends Regulation Z and ESIGN Act in the name of CX

Regulation Z requires that financial institutions provide written disclosures to customers to maintain compliance. Meanwhile the ESIGN Act allows consumers to provide consent to these written disclosures through electronic signatures. Specifically, for the document or agreement to be valid, the consumer must “consent electronically, or confirm his or her consent electronically, in a manner that reasonably demonstrates that the consumer can access information in the electronic form that will be used to provide the information that is the subject of the consent.” Notably, another provision explicitly mentions that oral communications do not count as electronic records of consent. Yet given that legacy eSignatures aren’t as convenient as businesses and regulators need them to be, and are actually a hindrance to banks’ productivity in this high-stakes environment, the CFPB has waived the requirement for these outdated eSignatures in certain instances. In the words of the CFPB: The Bureau is issuing this statement of temporary and targeted flexibility for credit card issuers regarding electronic provision of certain disclosures required to be in writing during this pandemic. The Bureau intends that this supervisory and enforcement flexibility will facilitate credit card issuers’ ability to quickly assist consumers during the pandemic. The CFPB isn’t quick to suspend compliance regulations, as they are generally considered in the interest of the very people the CFPB is trying to protect. For the CFPB to make such a move means that they recognized that customer experience and efficiency were notably hurt by legacy eSignatures.

Legacy eSignatures have high-friction, low-completion rates

Banks’ growing realization of legacy eSignatures as inefficient and are out of step with today’s customer experience expectations. Legacy eSignatures are built for email, which is certainly a step up from the wet signatures on paper of yesteryear. Yet customers that are on the go or otherwise lack computer access cannot easily provide consent while they are on a phone call with an agent. Moreover, 17% of American households are considered “smartphone-only,” meaning their only means of connecting to the Internet is via a smartphone. Without ready access to a desktop or laptop computer, sending an eSignature while on a call with an agent is even more challenging. Customers who do try to provide a legacy eSignature through their smartphone have their work cut out for them: they must stay on the line with the agent, open their inbox, attempt to download a PDF that’s not optimized for mobile, and affix an eSignature. The process, which is always difficult and unintuitive, is made even more excruciating due to the circumstances surrounding the need for the eSignature (i.e., financial relief). Even customers who do manage to provide their consent via smartphone will have wasted precious time, effort, and stress — both theirs and the agents’. Given all this, we can applaud the CFPB for highlighting the inefficiency of antiquated eSignature solutions, and encourage the industry to upgrade their eSignature and compliance systems to match today’s mobile, on-the-go customer.

Compliance, eSignatures and convenience can go hand in hand

Thankfully, compliance and ease can go together. Regulators, businesses, and front line call centers need not bounce customers around friction-filled customer journeys. They should not have to subject customers with time-draining, outdated technology, nor need they become lax when it comes to compliance. To that end, a new generation of compliance technology has evolved to address these CX issues. Next-generation eSignature solutions bypass the usual problems with eSignatures and have an interface that’s optimized for whatever channel the customer is using, web or mobile. In fact, mobile is where today’s advanced eSignatures really shine. This means that banks and regulatory bodies no longer have to choose between convenience and compliance. Banking call centers can easily collect customer consent from a secure mobile environment in the moment, ensuring the first call is the last one. Next generation eSignatures can provide the right tools to the financial industry so consumers can be served well, banks can maintain productivity, and regulators can do their duty without compromise.