Q If a mortgage lender transfers servicing to another party, does the new servicer need to provide the Electronic Signatures in Global and National Commerce Act (E-SIGN) disclosure and again obtain the consumer’s demonstrable consent to receive electronic disclosures?
A It is generally prudent for transferee servicers to obtain new E-SIGN Act consent following a servicing transfer. 15 USC §7001(c) states that prior to sending disclosures electronically, an institution must provide the consumer with the hardware and software requirements for accessing and retaining electronic records as well as the procedures for withdrawing consent, obtaining paper records, etc. Subsection (c)(1)(D) goes on to say that if the hardware or software requirements for accessing or retaining electronic records change, the institution must obtain a new consent.
In the case of a servicing transfer, these software and hardware requirements may (and often do) change, thereby requiring new consent. Even if the hardware and software requirements between the two institutions are the same, there is a strong argument that new consent is required because the new servicer will likely employ different procedures (e.g., different contact, telephone, mailing address, etc.) for withdrawing consent and/or obtaining paper copies of electronic records.
Finally, it’s worth noting that the initial E-SIGN disclosure must, among other things, “inform the consumer of whether the consent applies (I) only to the particular transaction which gave rise to the obligation to provide the record, or (II) to identified categories of records that may be provided or made available during the course of the parties relationship” (emphasis added). This verbiage seems to suggest an intent to limit the scope of consent to individual institutions.
In sum, it is generally prudent for transferee servicers to obtain new E-SIGN Act consent. In very limited instances, and, depending on the scope of the original consent and the technical requirements of the transferee servicer, it may be possible to argue new consent is not required but not obtaining new consent carries a fair amount of risk. (Response provided with assistance of the Bradley Law Firm) (1/2024.)
For more information, contact ABA’s Leslie Callaway.
Please note that this section is not a substitute for professional legal advice.
