Lattes, Pajamas, E-Sign and EFTA – Verbal Recordings Are Electronic Signatures

There is no better way to authenticate a person’s assent to a contract then to record their statement, “I agree to this contract.”  A recording of a person’s voice is far more persuasive evidence to authenticate not only consent, but the identity of the individual who gave consent to the transaction.

If you agree, we are in good company.  At the advent of the Internet Age, our federal legislators believed electronic transactions would benefit commerce, and so we have The Electronic Signatures in Global and National Commerce Act (“E-Sign Act”), 15 U.S.C. §§ 7001, et seq.  

E-Sign makes consumer financial transactions far more efficient and accessible. It encourages the development of consumer-friendly technologies like remote deposit of checks using a smartphone. Today, we pay your bills, transfer funds from savings to checking and do all those things in a mouse click or two while sipping a latte in the comfort of our pajamas. Two decades ago, it would all require a visit to your local bank branch.

I hated visiting my local bank branch. I love the convergence of technology and lattes.

Recently, there has been some confusion concerning how E-Sign and the Electronic Funds Transfer Act (“EFTA”) work together — particularly the use of a voice recording as a signature in consumer transactions. So, here’s my endeavor to clear up that confusion.

The EFTA 

The Electronic Funds Transfers Act (“EFTA”) 15 U.S.C. §§ 1693, et seq.,  enacted in 1968 desires “to provide a basic framework establishing the rights, liabilities, and responsibilities of participants in electronic fund and remittance transfer systems. The primary objective of this title, however, is the provision of individual consumer rights.” § 1963(b). The EFTA authorizes the Fed (and now the Consumer Financial Protection Bureau (“CFPB”)) to make regulations furthering its objectives.

The EFTA regulates “electronic fund transfers” (“EFT”) which are “. . . any transfer of funds that is initiated through an electronic terminal, telephone, computer, or magnetic tape for the purpose of ordering, instructing, or authorizing a financial institution to debit or credit a consumer’s account.” 12 CFR 205.3(b)(1). An “account” is a

demand deposit, savings deposit, or other asset account (other than an occasional or incidental credit balance in an open end credit plan as defined in section 103(i) of this Act [15 USCS § 1602(i)]), as described in regulations of the [CFPB], established primarily for personal, family, or household purposes, but such term does not include an account held by a financial institution pursuant to a bona fide trust agreement;[1]

When you establish a payment plan to make recurring debits from a consumer account, you have created what the EFTA terms a “preauthorized transfer.” “Preauthorized transfers” are be agreed to by the consumer in advance and take place “on a recurring basis, at substantially regular intervals, and will require no further action by the consumer to initiate the transfer.” [2] The EFTA and Regulation E impose certain requirements when establishing preauthorized transfers; namely, they must be obtained in a writing that the consumer signs or “similarly authenticate[s].”  [3]

E-Sign, Electronic Records and Electronic Signatures 

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E-Sign provides that electronic records and electronic signatures have the same validity as paper documents and handwritten signatures. If the EFTA calls for a writing to be made in connection with a transaction, the writing can be satisfied by an electronic record. If the EFTA requires a writing to be “signed or similarly authenticated,” the requirement can be satisfied through an electronic signature.

E-Sign expressly prohibits creating an electronic record solely by “. . .a recording of an oral communication . . . except as otherwise provided under applicable law.” Unfortunately, some have failed to recognize the E-Sign’s distinction between electronic records and electronic signatures,  simply, but mistakenly, believing they are one and the same. This misunderstanding has resulted in reckless claims that the prohibition against creating electronic records through “a recording of an oral communication” means voice recordings cannot be an electronic signature capable of satisfying the EFTA’s or other consumer statute’s requirement that a document be “signed or similarly authenticated.” The interpretation is wrong.

If you pay careful attention to the structure and language of E-Sign’s definitions of electronic records and electronics signatures, and consider the Congressional Record made at the adoption of E-Sign, it is obvious that a voice recording is an electronic signature and valid for satisfying any consumer statute, like EFTA, that requires a signed document.

Electronic records are “. . . a contract or other record created, generated, sent, communicated, received, or stored by electronic means.”[4] Where a consumer protection statute, regulation or “rule of law” requires that a document or information be provided or available to a consumer, “in writing,” the E-Sign Act allows the document to be provided as an electronic record.[5] But, E-Sign expressly prohibits the electronic record being created by an oral communication or a recording of an oral communication.[6]

Electronic signatures are “. . . an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.”[7] Electronic signatures are not electronic records and nothing prevents their creation by an oral communication or a recording of an oral communication.

The legislative history of the E-Sign Act demonstrates that Congress intended that a voice recording is not only an electronic signature, it is a very effective electronic signature:

It should be noted that Section 101(c)(6) [of E-Sign] does not preclude the consumer from using her voice to sign or approve that record. Proper voice signatures can be very effective in confirming a person’s informed intent to be legally obligated. Therefore, the consumer could conceivably use an oral or voice signature to sign a text record that was required to be given to her “in writing.” Moreover, the person who originated the text record could authenticate it with a voice signature as well. The spoken words of the signature might be something like “I Jane Consumer hereby sign and agree to this loan document and notice of interest charges.”[8]

To suggest, as some mistakenly have, that an audio recording of the consumer’s verbal consent is arguably not a sufficient electronic signature, is simply contrary to the express definition of an an electronic signature under E-Sign and the Congressional Record made at its enactment.

I refused to accept that pajama-clad, latte-sipping banking from the comfort of home might be over. Many in the consumer financial services sector, who regularly authenticate consumer financial transactions using voice recordings, were very concerned to hear that voice recordings might not qualify as an electronic signature. Did we all, in the nearly 20 years since E-Sign’s passage, misunderstand that a person’s voice, captured electronically, giving consent to a consumer financial service is not a valid electronic signature?

No – enjoy your coffee at home while banking online. You can sign your consumer financial transaction documents with your voice recording. That’s what Congress wants you to do.


1. 15 U.S.C. § 1693a(2).
2. 52 F.R. at 15193.
3. 12 C.F.R. 205.10(b).
4. 15 U.S.C. § 7006(4)
5. Id.
6. 15 U.S.C. § 7001(c)(6) (“Oral communications. An oral communication or a recording of an oral communication shall not qualify as an electronic record for purposes of this subsection except as otherwise provided under applicable law.”) This does not mean that voice technology cannot be used to create an electronic record. “By way of clarification, the intent of this clause is to disqualify only oral communications that are not authorized under applicable law and are not created or stored in a digital format. This paragraph is not intended to create an impediment to voice-based technologies, which are certain to be an important component of the emerging mobile-commerce market. Today, a system that creates a digital file by means of the use of voice, as opposed to a keyboard, mouse or similar device, is capable of creating an electronic record, despite the fact that it began its existence as an oral communication.” 146 Cong Rec S 5281, 5284 (June 16, 2000)(Senate Conference Report on the E-Sign Act)
7. 15 U.S.C. § 7006(5)
8. 146 Cong Rec S 5281, 5284 (June 16, 2000)(Senate Conference Report on the E-Sign Act)

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Donald Maurice provides counsel to the financial services industry, successfully litigating matters in the state and federal courts in individual and class actions. He has successfully argued before the Third, Fourth and Eighth Circuit U.S. Courts of Appeals, and has represented the financial services industry before several courts including as counsel for amicus curiae before the United States Supreme Court. He counsels clients in regulatory actions before the CFPB, and other federal and state regulators and in the development and testing of debt collection compliance systems. Don is peer-rated AV by Martindale-Hubbell, the worldwide guide to lawyers. In addition to being a frequent speaker and author on consumer financial services law, he serves as outside counsel to RMA International, on the governing Board of Regents of the American College of Consumer Financial Services Lawyers and on the Governing Committee of the Conference on Consumer Finance Law. From 2014 to 2017, he chaired the ABA's Bankruptcy and Debt Collection Subcommittee.