In this month’s article, we’re focusing on electronic signatures and deposit accounts. Back in January, we published a newsletter about using electronic signatures for loans—how it works, what’s possible, and the key guardrails and considerations involved.
Today, we’re shifting the focus to electronic signatures and deposit accounts. Not long ago, we were frequently asked: Can you use an electronic signature to open a deposit account? The answer is yes—and by now, that’s fairly common knowledge. However, what may be less widely understood is how that transition works when moving from a paper-based process to an electronic one.
What may be less widely understood is how that transition works when moving signatures from a paper-based process to an electronic one.
For a long time, the standard process banks have followed to open deposit accounts has looked something like this: present the depositor with an account agreement and a series of required disclosures, then—at some point in the process—have the depositor sign a signature card.
THE SIGNATURE CARD
The signature card itself has evolved. It used to be a small card, about 3×5 or 4×6 inches, with the account selection and a sample signature. Today, it has typically become a one-page document. While there may be slight differences from bank to bank, most signature cards generally include the same key elements:
- A short-form W-9 to collect the depositor’s tax ID and certify its accuracy
- A section to select the type of account being opened
- A space for the depositor’s signature sample
- Basic information such as the depositor’s address and the account number
So, what function does the signature card serve in a paper process? Primarily, it captures four key things:
- The depositor’s tax ID
- A signature sample
- The selected account type
- The depositor’s agreement to the deposit account terms, as indicated by their signature
Other details may be included, but these are the core elements that define the purpose of the signature card in traditional account opening.
TRANSITIONING TO PAPERLESS
If you’re transitioning from a paper process to an electronic one, one key step is replacing the paper signature card. One of the first things that tends to get lost in that transition is the signature sample. There are ways to capture that electronically—we’ll touch on that in a moment—but it’s worth stepping back to consider the broader picture. When you move the signature card into an electronic process, you may start to realize that the traditional signature card itself can almost disappear.
You still need a few essential things from the depositor:
- A signature acknowledging receipt of required disclosures
- A signature agreeing to the account agreement
- A completed W-9
- Identifying information about the depositor
But you’re no longer bound to the physical format of the signature card you’ve always used. You can replicate the components electronically—and often, that works well. However, if your process includes unique steps or requirements, sticking to a traditional-style signature card (even in electronic form) can make it harder to adapt or streamline those parts.
If you’re transitioning from a paper process to an electronic one, one of the key steps is replacing the paper signature card.One of the first things that disappears in that transition is the signature sample. There are ways to capture that electronically—we’ll touch on that in a moment—but it’s worth stepping back to consider the broader picture. When you move the signature card into an electronic process, you may start to realize that the traditional signature card itself can almost disappear.
You still need a few essential things from the depositor:
- A signature acknowledging receipt of required disclosures
- A signature agreeing to the account agreement
- A completed W-9
- Identifying information about the depositor
But you’re no longer bound to the physical format of the signature card you’ve always used. You can replicate the components electronically—and often, that works well. In fact, you don’t necessarily need a signature card at all. There are other ways to complete the process and open a deposit account without using a traditional signature card.
That said, this is one of the main considerations in moving to an electronic process: if you choose to eliminate the signature card, you need to be thoughtful about what it represented. Make sure you’re capturing the same information—through other documents or methods—so that nothing important is lost in the transition.
CONSUMER VERSUS ELECTRONIC ACCOUNTS
The next consideration when using electronic signatures for deposit accounts is the distinction between consumer and commercial accounts.
For commercial accounts—as we covered in our January newsletter—all that’s required is the agreement of the business or business owner to use electronic signatures for the relationship or specific contract. This can be handled easily through the account agreement itself, a dedicated disclosure, or an add-on to an existing disclosure.
Consumer accounts, however, involve an additional step: the E-SIGN consent process. This requirement stems from the E-SIGN Act of 2001, which originally lacked strong enforcement provisions. Since then, regulators like the CFPB have incorporated E-SIGN requirements into various consumer protection regulations. If you’re delivering consumer disclosures electronically and don’t include an E-SIGN consent process, it can lead to a violation of those regulations.
Relevant regulations include:
- Reg DD (Truth in Savings Act)
- Reg E (Electronic Fund Transfer Act)
- And others depending on the type of account and services offered
If you’re opening consumer accounts electronically, you’ll need to include E-SIGN consent in your process.
The consent process is relatively straightforward. You must inform the consumer:
- What you plan to use electronic signatures for
- How they will sign documents
- What hardware and software are required to receive and sign documents electronically
- Whether they have the right to receive paper copies or alternative forms of disclosure
- How they can withdraw their consent
These steps ensure compliance and give consumers the information and choice required under the law.
E-SIGN CONSENT MISTAKES & VALIDITY
One common mistake we see with E-SIGN consent is that it gets buried within the documentation—sometimes placed at the end, after the consumer has already signed several documents. This can create compliance issues, because the purpose of E-SIGN consent is to obtain agreement before delivering electronic disclosures, not after. When the steps are out of order or mismatched in the process, it undermines the intent and legality of the consent.
Another important topic when working with consumers and electronic signatures is the validity of the signature. Unlike in-person interactions, electronic signatures don’t involve the customer physically sitting in front of a bank employee. So it’s critical to establish a reliable way to tie the identity of the person to their electronic signature.
There are several common methods for doing this. One of the most effective is to build a login process at the beginning of the customer’s onboarding journey. As part of that process, the customer creates a profile with a username and password that’s linked to their account. From there, you can collect identifying information—such as an ID, phone number, email, and other documentation—that helps confirm their identity.
Some common elements of identity verification include:
- Submitting a government-issued ID
- Providing beneficial ownership or customer-identifying information
- Answering knowledge-based questions tied to a credit report
- Uploading additional documents to confirm identity
As this information is gathered, it builds a strong, verifiable profile—a “bucket of proof”—that links the individual to their electronic activity. Once this profile is in place, any subsequent electronic signatures or acknowledgments can be clearly tied back to that verified identity.
For example, if someone visits your website to open an account and goes through a full electronic onboarding process—including login, identity verification, and documentation—you’ve built a solid foundation to show that the individual signing the documents is, in fact, who they claim to be. This connection strengthens the enforceability of the electronic signature and supports compliance.
CONCLUSION
That’s a brief overview—we could certainly cover more on this topic. If you have any questions or comments about electronic signatures, we’d be happy to discuss further. Please don’t hesitate to reach out. Thanks for reading!
Farley Law specializes in working with both community banks and small businesses. If you are interested in learning more about these or any other income-generating activities for banks, please feel free to contact us at Farley Law, where we help our client financial institutions develop new products and financial services.