Legislature(2003 - 2004)
05/12/2003 03:20 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 285-ELECTRONIC TRANSACTIONS & SIGNATURES CHAIR ANDERSON announced that the final order of business would be HOUSE BILL NO. 285, "An Act adopting the Uniform Electronic Transactions Act; repealing certain statutes relating to electronic records and electronic signatures; amending Rule 402, Alaska Rules of Evidence; and providing for an effective date." Number 1241 HEATH HILYARD, Staff to Representative Lesil McGuire, Alaska State Legislature, presented HB 285 on behalf of the sponsor. Mr. Hilyard provided the following testimony: The fundamental purpose of adopting UETA [Uniform Electronic Transactions Act], as it's commonly referred to, is to remove perceived barriers to electronic commerce. UETA is a procedural statute and does not mandate either electronic signatures or records but provides a means to effectuate transactions when they're used. The primary objective is to establish the legal equivalence of electronic records and signatures with the paper writings and manually signed signatures. In a position paper prepared by the National Conference of Commissioners on Uniform State Laws, they offer several compelling reasons why states should adopt UETA. Among these being, UETA defines and validates electronic signatures. An electronic signature is defined as an electronic sound, symbol, or process attached to a logically associated with an electronic record and executed or adopted by a person with the intent to sign the electronic record. UETA removes writing and signature requirements which create barriers to electronic transactions; UETA ensures that contracts and transactions are not denied enforcement because electronic media are used. UETA ensures that courts accept electronic records into evidence [and] protects against errors by providing appropriate standards for the use of technology to assure party identification. UETA avoids having the selection of medium govern the outcome of any disputes or disagreements. And it assures that parties have the freedom to select the media for their transactions by agreement. Lastly, UETA authorizes state governmental agencies to create, communicate, receive, and store records electronically and encourage state government, governmental entities, to move to electronic media. Number 1361 SHARON YOUNG, State Recorder, Division of Support Services, Department of Natural Resources (DNR), testified in support of HB 285. As Mr. Hilyard noted, such legislation has been presented in a number of legislatures across the country. She recalled that 40 states have adopted UETA. This legislation is important to the land recording system in Alaska because it would provide a uniform framework for dealing with electronic reporting in the future. She opined that enactment of this type of provision will benefit commerce in those states that enact this type of provision. Other agencies would also benefit from this legislation. Government work and services are increasingly being performed electronically. The UETA is the means by which consistent procedures for these transactions can be developed and assured. A high percentage of mortgage transactions in Alaska involve out-of-state lenders, she noted. MS. YOUNG pointed out that UETA gives states the option of determining whether to adopt and implement electronic filing systems or electronic reporting systems. Such optional provisions are located in Sections 140-160 of this legislation. Together, Sections 140-160, provide broader authorization for a state to develop electronic systems and processes in interactions with nongovernmental entities and persons. Historically, land recording systems have evolved around written records and processes based on paper documents. However, this legislation would mean that those papers would be equal to electronic media. She opined that this will be the future for recording systems. Number 1534 CHAIR ANDERSON highlighted the lack of a fiscal note with HB 285. He surmised that the lack of a fiscal note is because it is difficult to extrapolate the potential benefits [that would save money]. MS. YOUNG reiterated that HB 285 doesn't require anything different than what is being done today; it doesn't require electronic recording. Therefore, no fiscal note was created. The legislation merely provides a framework if [the agency] moves to that in the future. Number 1645 REPRESENTATIVE CRAWFORD inquired as to how this would work if [an individual] wanted to "side step" a local title company and refinance property with an out-of-state company. Specifically, he asked how the closing would occur and ensure that the correct parties are involved. MS. YOUNG said that [the department] doesn't have all those procedures defined. In fact, UETA recommends that these states develop standards and uniform approaches to provide "interoperability" so that the electronic recording systems in one state are compatible with those in another. Ms. Young mentioned that a number of national organizations are supportive and involved with UETA, including the Property Records Industry Association. The aforementioned association is a private and public organization, which is currently developing standards. Ms. Young emphasized that UETA is available for any agency to use with transactions between parties; the electronic filing and recording aspect of UETA is a small portion of this legislation. REPRESENTATIVE CRAWFORD surmised then that there is no real national standard. In the case of electronic signatures on state forms, he inquired as to how one would verify those. MS. YOUNG opined that part of the standards would address electronic notaries. She assured Representative Crawford that there would be assurances for authentication of an individual before a notary or certification authority. REPRESENTATIVE CRAWFORD said that he wanted to pass the legislation, but it seems that the cart is being placed before the horse by making it legal to do electronic recording and filing without having the standards in place. Number 1858 MS. YOUNG informed the committee that there is already a federal electronic signatures law in place, E-Sign [Electronic Signatures in Global and National Commerce Act]. In fact, there was an electronic signature law in Alaska before E-Sign was adopted. If UETA is adopted in its entirety, it provides a broader authorization for dealing with electronic transactions and would actually prevail over the federal law. REPRESENTATIVE CRAWFORD inquired as to how the federal law works. Number 1975 REPRESENTATIVE GATTO referred to a document from the National Conference of Commissioners on Uniform State Laws dated 11/20/01 in the committee packet. He said this document relates that 46 states have adopted UETA. MS. YOUNG said that she was only aware of 40 states that have adopted UETA. However, she said that the National Conference of Commissioners on Uniform State Laws would be reliable because the organization actually develops the uniform laws. Number 2037 DAVID JONES, Assistant Attorney General, Governmental Affairs Section, Civil Division (Anchorage), Department of Law, turned to Representative Crawford's earlier question. Mr. Jones reiterated Ms. Young's testimony that HB 285 is designed to set up a framework for the enforcement of electronic transactions and not to specify requirements regarding those transactions. He explained that UETA doesn't require people to engage in electronic transactions rather UETA is designed as enforcement for those who have chosen to use electronic transactions. Those using electronic transactions are in the best position to judge what level of security or assurance they need from the others involved in the transactions. Mr. Jones pointed out that there are various levels of securities available to those using electronic transactions, such as the use of a pin number as a signature or the public key infrastructure. He noted that the public key infrastructure has a cost to it, and therefore it would be cheaper to use a pin number. This legislation wouldn't make the aforementioned choices, rather those choices would be left to the individuals involved in the transactions. This legislation merely specifies that the state will recognize the enforceability of electronic transactions. REPRESENTATIVE CRAWFORD reiterated his question regarding how electronic transactions would work. CHAIR ANDERSON drew attention to a memorandum from USKH [Unwin Scheben Korynta Heuttl, Inc.] which provided an example of how the production process of designing a project is completely electronic, except for the requirement of a "wet" signature on the final drawings. MR. JONES said that he has performed electronic transactions in ordering services and goods over the Internet. This legislation would merely make those transactions enforceable when one doesn't get what he/she ordered. Number 2214 REPRESENTATIVE GUTTENBERG remarked that if this legislation does merely establish a framework, then he is concerned with regard to the organization that does it and the problems that already exist with electronic matters, such as the readability between PCs and Macintosh computers. MR. JONES specified that this legislation is a framework to allow people to answer those questions and create specific requirements just as is currently done with paper transactions. In further response to Representative Guttenberg, Mr. Jones highlighted that the federal E-Sign law specifies that no state law can favor a particular technology over another, otherwise it will be preempted by the federal law. Since UETA doesn't specifically favor a particular technology, it has been given the express exemption from preemption under the federal law. Mr. Jones pointed out that if the state were to choose a particular technology the law could become obsolete due to the speed at which technology is changing. Number 2355 SCOTT CLARK, Notary Clerk, Office of the Lieutenant Governor, testified on behalf of the lieutenant governor in favor of HB 285. Mr. Clark stated that Alaska does have an electronic signature law, although it is restricted to a specific type of technology. He related his observation that the aforementioned has limited the advancement of the electronic transaction process. Therefore, UETA would step backwards and create a broad framework with regard to the legal definition of an electronic signature. TAPE 03-51 SIDE B MR. CLARK echoed earlier testimony regarding the importance of not penning the state into a corner by adopting [legislation that specifies a particular technology to be used for electronic transactions]. REPRESENTATIVE GATTO asked of notaries could lose their livelihood [with the adoption of this legislation]. MR. CLARK answered that it wouldn't be likely because there are aspects of notarization that an electronic signature will never be able to replace. For example, notaries check for the willingness and competency of the signer. He said he wasn't sure how technology would replace the aforementioned human interaction. Mr. Clark commented that UETA would provide the framework by which the state could look at what an electronic notarization would look like. He reiterated earlier testimony that HB 285 wouldn't mandate an electronic notarization. In fact, current notary law requires a handwritten signature. He mentioned that the notary laws will need to be updated in order to accommodate this electronic notarization/signature. CHAIR ANDERSON, upon determining no one else wished to testify, closed public testimony. Number 2278 REPRESENTATIVE LYNN moved to report HB 285 out of committee with individual recommendations and the accompanying zero fiscal note. REPRESENTATIVE CRAWFORD remarked that he is at a complete loss. He said that he didn't receive much clarification with regard to how this would work. He related that although he isn't going to object to HB 285 moving out of committee, he might not vote for it on the House floor if he doesn't receive some answers. He mentioned that perhaps the local title companies would have some input on this. REPRESENTATIVE LYNN noted that for real estate transactions, one can do many things by e-mail and fax, but hardcopies [handwritten signatures] have to follow at some point. REPRESENTATIVE CRAWFORD asked if Representative Lynn was sure that was the case because he understood electronic signatures to hail the end of [the need for handwritten signatures]. REPRESENTATIVE GUTTENBERG said that he wasn't going to oppose the legislation moving from committee, but he suggested that there needs to be a model or direction for this. Number 2123 MR. HILYARD informed the committee that the House Finance Committee is hearing legislation today that will promote a pilot program for electronic procurement. Although this pilot program wouldn't necessarily require UETA or advanced electronic signature technology, UETA or advanced electronic signature technology would potentially make this pilot program more effective. He noted that the State of Virginia has a thorough electronic procurement process and is moving toward using many of the on-line technologies to effectuate state business. With respect to electronic signatures, Mr. Hilyard related his understanding that the legislature will have the ability to specify when electronic signatures can be used and when they can't. He offered to do further research and provide the committee with information regarding what the state of Washington, Virginia, and Texas are doing since implementation of electronic procurement. Mr. Hilyard remarked that [passage of the legislation] will allow [the state] to more effectively leverage technology for streamlining state government. CHAIR ANDERSON interjected the possibility of an [electronic] permanent fund dividend application or voter registration. MR. HILYARD highlighted that income taxes can be electronically filed. However, one can't completely file a permanent fund dividend electronically. REPRESENTATIVE CRAWFORD commented that he understands the move toward electronic business, but he merely wants to know more about it. CHAIR ANDERSON, upon hearing no objection, announced that HB 285 was reported from the House Labor and Commerce Standing Committee.
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