Electronic Signatures

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Shelly ReppGeneral CounselNCHELP
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Objectives

• Provide overview of legal developments
• Provide overview of EDs Standards for
  Electronic Signatures in Electronic Student Loan
  Transactions
• Provide overview of SFA PIN authentication service

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FFELP Is Well Suited for E-Signature

• Our industry is particularly well positioned to
  take advantage of this
• Students as a group are e-commerce savvy and
  comfortable
• Much of the interaction among students/parents,
  schools, lender, guarantors is already performed
  remotely
• Electronic is already the primary means of
  communication for the vast majority of FFEL
  Program interactions
• E-signature closes the loop on electronic
  processing
• Low risk

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Lenders Must Decide

• Whether to offer an electronic signature option
• Whether to follow the Standards
• Whether to use the SFA PIN authentication service

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Electronic SignaturesThe Opportunities

• Convenience with valid electronic signatures,
  parties to a contract do not need to exchange
  physical copies of the contract to have a valid,
  binding agreement. All required disclosures can
  be provided on line.
• Time savings transactions can be closed
  instantly, speeding up the business cycle.
• Enhanced security depending on the technology
  used, an encrypted electronic signature can
  establish a tamper-proof electronic record.
• Cost savings it is far easiest in general to
  organize and store electronic records than paper
  records.

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Electronic Signature - Definition

• An electronic signature is an electronic symbol
  or process attached to or logically associated
  with a record, and executed by a person with
  intent to sign the record.

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General Rules of Validityin E-Sign Act

• A contract or record may not be denied legal
  effect because it is in electronic form
• Corollary Delivery or retention of electronic
  record satisfies any legal requirement that a
  contract or record be provided or retained in
  writing or in original form
• A contract may not be denied legal effect because
  it is signed electronically

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The E-Sign Act does not specify the technology
that may be used.

• I agree button
• Digitalized image of signature
• PIN number
• Digital certificate

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FFELP Issues

• What is the Departments position?
• Will federal benefits be assured?
• Federal authentication role

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EDs Standards for Electronic Signatures in
Electronic Student Loan Transactions
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What Are the E-Sign Standards?

• Standards are Voluntary
• Identify a Safe Harbor
• a lender . . . whose processes for electronic
  signatures . . . satisfy the standards . . . will
  be protected from the loss of Federal benefits on
  a loan if the loan is . . . legally unenforceable
  based on the process

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Specific Topics Addressed

• Borrower Consent
• Electronic Signatures
• Format of Electronically Signed Records
• Integrity of Electronic Records
• Managing and Maintaining Electronic Records
• Assessing Electronic Records
• Holder Certifications

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Types of Electronic Signatures Recognized

• Shared secret (PIN password)
• Digital certificate (unique credential. . .
  provided by a trusted third party, such as a
  public-private keypair, a cryptographic smartcard
  or one-time password)
• Biometrics
• Signature image (digitized signature)
• A typed name, combined with any of the above

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• Public Key Infrastructure (PKI) initially looked
  like the technology
• Government adopted it (ACES)
• On further review, too complex and expensive for
  B2C commerce
• PINs are simpler
• Most online banking systems use PIN-based
  authentication

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Issues

• Do the same standards apply to all circumstances
  in which an electronic signature will be used?
• Electronic record standards (records will need to
  be transferable)
• What is meant by the access requirement?
• What is scope of the holder certification?
• How is a customers identity confirmed
  (authenticated)?

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Authentication Issues

• Identity validation requirements
• Must confirm name, SSN, and date of birth or DL
  with an independent third party before a PIN or
  other signing credential is issued
• Confirmation of name, SSN, DOB or DL through
  third party
• Credit bureaus
• Commercial data sources
• State motor vehicle agencies
• Government databases
• Not school databases
• Must mail the PIN to the consumer, rather than
  assigning it as part of the online session

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Practical Effect

• It may be impractical for FFEL lenders to
  establish their own safe harbor PIN process
• Difficult to find a third party entity that could
  consistently validate a high percentage of
  identities, especially high school seniors and
  entering freshmen
• Would be forced to interface with multiple
  entities or deny an unacceptable percentage of
  e-sign attempts
• The requirement to mail the PIN makes e-signature
  slower than a wet signature provided at the
  conclusion of a regular online session

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EDs PIN Authentication Service
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SFA and PINs

• SFA Is Using the SFA PIN Infrastructure to
  Authenticate Signatures for Direct Lending
• SFA Will Validate this PIN for FFELP Participants

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Student Authentication Network (STAN) Service

• A secure service that authenticates borrowers
  SFA PINs and stable data (Name ID, Date of Birth,
  SSN) against the SFA PIN database so borrowers
  can e-sign Title IV loan promissory notes in
  compliance with the E-Sign Act.

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How Process Works

• The borrower obtains a PIN from SFA
• The borrower initiates a session at the FFELP
  participants website
• The borrower is prompted for the SFA PIN, and
  this PIN and other identifiers (e.g. date of
  birth, social security number) are transmitted to
  SFA
• SFA responds Yes or No, which includes
  additional transaction identification data
• The FFELP participant preserves all information
  related to the authentication and signing

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The Service is Administered by NCS Pearson

• System Requirements Have Been Published
• Model Agreement is Available
• IndustryAssociations Have Worked to Enhance
  Agreement Protections

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Summary

• Progress is being made
• There should not be higher standards for
  e-transactions than for ink
• In short run, lenders will use SFA-PIN process

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The Future

• Integration of multiple e-sign applications
  (interoperability)

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For More Information

• Go to the
• Electronic Signature Information Page
• at
• www.nchelp.org

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Questions?