BILL ANALYSIS
AB 700
Page 1
Date of Hearing: May 2, 2001
ASSEMBLY COMMITTEE ON JUDICIARY
Darrell Steinberg, Chair
AB 700 (Simitian) - As Introduced: February 22, 2001
SUBJECT : ELECTRONIC SIGNATURES: NOTARIZATION
KEY ISSUE : GIVEN THAT THE USE OF ELECTRONIC SIGNATURES
PRODUCES CERTAIN BENEFITS BUT ALSO RENDERS IMPRACTICAL CERTAIN
FUNCTIONS OF NOTARY PUBLICS, SHOULD THE LEGISLATURE AMEND THE
LAWS GOVERNING THE VERIFICATION OF ELECTRONIC SIGNATURES TO
PROVIDE CLEARER GUIDANCE TO NOTARIES AND CERTIFYING AUTHORITIES?
SYNOPSIS
This Bill Seeks To Amend The Notarization Process For Certain
Electronic Signatures. Existing Law Permits The Use Of
Electronic Signatures, Or "E-Signatures," In A Variety Of
Transactions. Under This Measure, Persons Charged With
Verifying Certain E-Signatures Could Do So Either By Examining
The Entirety Of The Electronic Record, Or By Complying With
Alternative Procedures Adopted By The Secretary Of State.
Proponents Assert That A Balance Must Be Struck Between The
Efficiencies Of E-Signature Use And The Important Authentication
Function Performed By Notary Publics. These Groups Note That
While Current Law Allows A Notary's Signature And Other
Information To Be Submitted In Electronic Form, The Law Remains
Silent As To The Continuing Need For Traditional Notary
Functions, Such As Personal Appearances, And The Recording Of
Thumbprints In Notary Journals. Proponents Also Suggest That
The Continuation Of These Requirements In The Context Of Certain
E-Signatures Would Diminish The Speed And Economy Of These New
Technologies, And That A Functionally Equivalent Measure Of
Consumer Protection May Be Achieved Through The Development Of
New Regulatory Parameters By The Secretary Of State.
SUMMARY : Provides alternative methods for satisfying
notarization requirements pertaining to transactions utilizing
e-signatures. Specifically, this bill provides that such
requirements shall be deemed satisfied where:
1)The signature conforms to existing requirements concerning the
use of e-signatures in communications with public entities.
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2)The person charged with verifying compliance with these
requirements has either:
a) examined the entirety of the electronic record with
respect to the e-signature; or
b) complied with alternative procedures adopted by the
Secretary of State which provide a comparable level of
protection to the public.
EXISTING LAW :
1)Allows the use of electronic signatures in a variety of
transactions, including those pertaining to real estate.
(Civil Code section 1633.1 et seq . All further references are
to this code unless otherwise indicated.)
2)Provides that where the law requires a signature to be
notarized, a notary public may submit in electronic form, his
or her signature, as well as all other information required to
be included in a notarization by other applicable law.
(Section 1633.11.)
3)Permits the use of e-signatures in communications with public
entities provided they are unique, capable of verification,
solely under the control of the user, and are linked to data
in such a manner that if data were changed, the electronic
signature would be invalidated. Additionally, such signatures
must conform to regulations adopted by the Secretary of State.
(Government Code section 16.5.)
FISCAL EFFECT : This bill as currently in print is not keyed
fiscal.
COMMENTS : In commenting on the need for this measure, the
sponsors of this legislation write:
California has enacted a version of UETA (the Uniform
Electronic Transactions Act) under which real estate
transactions may occur electronically. . . .
Notarization of signatures is critical to the real
estate transaction because some recorded documents
must be notarized, and the importance to the consumer
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is so high. As a result, the transactional statutes
contain references to notaries and notarization.
Notaries have been institutionalized as a class of
service provider and regulated by the Secretary of
State. . . . The purpose of the notary is to ensure
that the person signing a document is in fact the one
whom they hold themselves out to be. They are
provided with a seal, oath, record book and regulation
to ensure that this role is adequately discharged.
More than one observer has suggested that the use of
digital signatures and document encryption make the
notary obsolete in an electronic transaction. Even
worse, if electronic transactions are required to use
the physical stamps and signings with "wet"
signatures, and personal appearances before notaries,
then the transactions will lose much of their speed
and economy and will never be truly electronic.
When a transaction uses an electronic signature,
existing law (Civil Code 1633.11) allows the notary's
signature and accompanying information to be in
electronic form as well. However, the law is silent
on other requirements such as personal appearances
before the notary and thumbprints in the notary's
journal.
Background . Two years ago the Legislature enacted SB 820 (Sher)
(Stats. 1999, Ch. 428), which codified part of the Uniform
Electronic Transactions Acts (UETA). Drafted by the National
Conference of Commissioners on Uniform State Laws (NCCUSL), the
impetus for UETA, and hence SB 820, was the exponential growth
of electronic commerce and the resulting spread of electronic
media, including the Internet, into households and businesses
alike. As a result of the passage of SB 820, California law now
recognizes the validity of e-signatures in a variety of
contexts.
SB 820 also provided mechanisms for the verification of
e-signatures by notary publics. For example, current law
permits notaries to submit their signature, as well as any other
information required to be included in a notarization, in
electronic form.
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Proponents state that the authentication function provided by
notary publics and certification authorities is of paramount
importance in ensuring the legitimacy of e-signatures in
commercial, real estate, and other transactions. In
co-sponsoring this measure, the California Mortgage Bankers
Association writes that, "[n]otarization of signatures is
critical to real estate transactions because so many documents
are signed and the importance to the consumer is so high."
The sponsors further note that current law is ambiguous as to
the need for "wet" signatures and personal appearances before
notaries, and that as a result of this uncertainty, the utility
of e-signatures may be lost in terms of speed and efficiency.
The California Association of Realtors, one of the co-sponsors
this bill, writes that the "lack of regulatory guidance" with
respect to the current e-signature notarization process, has
created problems for both professional verifiers and consumers
alike.
The Secretary of State's office has taken a "watch" position on
the measure, arguing that the bill may not be necessary. The
office states:
? since UETA and the federal Electronic Signatures in
Global and National Commerce Act, commonly known as
"E-Sign," require technological neutrality, tying
electronic notarization to digital signatures as proposed
by this legislation might be considered problematic.
Aside from the issue of whether this legislation is
necessary, the Secretary of State's office is concerned
about any attempt to amend the UETA set forth in Civil Code
section 1663.1 et seq., except to ensure that the language
is in conformity with the draft of the Uniform Electronic
Transactions Act prepared and approved by the National
Conference of Commissioners of Uniform State Laws. A
nonconforming UETA may cause confusion concerning the
implementation of E-Sign.
Pending Related Legislation :
SB 407(Sher) seeks to allow county recorders to accept and
maintain digitized images of recordable instruments, subject to
certain conditions. This bill is pending before the Senate
Committee on the Judiciary.
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SB 97 (Sher) would repeal the version of UETA codified by SB 820
and replace it with a new version of UETA that differs from the
former legislation in several respects. This bill is currently
awaiting referral in the Senate Rules Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Realtors (co-sponsor)
California Mortgage Bankers Association (co-sponsor)
California Association of Mortgage Brokers
FANNIE MAE
Mortgage Association of California
Opposition
None on file.
Analysis Prepared by : Richard Miadich / JUD. / (916) 319-2334