Going Paperless - What It Takes and How to Get There

The use of eSignatures is quickly becoming the standard MO in everything from real estate to retail purchase agreements. Those working in F&I report they hear fewer questions about the legality and enforceability of electronic signatures than ever before, as consumers’ exposure to electronic processes grows. P&A Magazine recently met with a panel of executives, who are leading the way in this digital era, to discuss the latest developments in the push to go paperless.

Daniel Lievrouw, vice president of operations and IT, American Guardian Warranty Services pointed out that eSignatures have been in use on the finance side of F&I for quite some time with notable success. “On the ‘I’ side of F&I, however, the use of eSignatures is still in its infancy. Recently some menu systems have announced initiatives they’re taking for eSignatures.”

John Jacobs, director of business development, eOriginal, Inc., presented an overview of eSignatures as defined by US law, and explained the various ways in which they are being used today. “An electronic signature is an electronic sound, symbol, or process that is attached to, or logically associated with a contract or record and is executed by someone who is intended to sign that record. The legal definition was made intentionally broad so as not to limit us in the different ways and methods in which we can capture electronic signatures from customers. It allows us be creative with how we capture an electronic signature.”

Jacobs listed numerous types of electronic signatures currently in use:

• Text type – Typing one’s name with a keyboard or keypad. This text font is representative of the customer’s signature.
• Drawing the signature – This can be done with a mouse, finger or a stylus on a touch screen, such as on a mobile phone or tablet.
• Voice recording – The recording of one’s voice accepting the terms of a contract. The recording is then attached to an electronic contract creating an electronic voice signature.
• Capturing an image of a signature­ – This can be done in many different ways.
• Using a signing pad – This is a connected signing pad with a stylus.
• Signing remotely – For example: a married couple makes a purchase but only one spouse can be present in the store. The other spouse can be sent an email link to a secure site where he or she can have access to the document and can provide his or her electronic signature.

• Out of the box – Utilizing the functionality and user interface of the vendor to load and present a document to the customer for the capture of their electronic signature.
• Integrated solutions –Integrating an electronic signature into an existing application, essentially replacing the “print” button. The document is generated electronically, the data is captured and applied to the document, and then in one streamlined fashion, the document is presented to the customer for the application of their electronic signature.

Electronic signature service can be delivered as a web-based application, mobile application or embedded application. Jacobs reported there are a variety of integration options, ranging from minimal (“zero”) integration to a complete OEM embedded solution, depending on business requirements and transaction volume. There are many ways to sign electronically. An individual can apply their signature by drawing it, uploading it, using a voice recording, by typing it, or using a mouse to sign. From explanations to legislation and authentication, this group had lots to say.

Understanding eSignature Law and Compliance

A major push to eliminate paper for high value contracts is underway. Companies looking to make this transition must comply with all laws pertaining to eSignature and electronic contract management. There are steps and best practices for creating legally admissible and legally enforceable electronically signed documents. Jacobs summed up the latest legislation and the provisions within the governing laws designed to protect the consumer:

ESIGN Act and UETA

In 2000, during Clinton’s presidency, Congress enacted the Electronic Signatures in Global and National Commerce Act (ESIGN Act). Its purpose was to facilitate the use of electronic records and signatures and ensure the validity and enforceability of electronic contracting to help businesses make their processes electronic. At that time, not many companies were executing theses processes.

• In addition to the federal ESIGN Act, all but three states have enacted the Uniform Electronic Transactions Act (UETA) allowing documents to have electronic signatures – and the other three states have enacted similar laws over which the ESIGN Act is potentially preemptive.
• The ESIGN Act did not change the basic rules of contract law; it preserves underlying consumer protection laws and the consumer's right to receive certain information in writing.
• Its purpose, as set forth in Section 101(a) of the ESIGN Act, was to make it clear that a signature, contract, or other record could not be considered invalid or unenforceable just because it was done in an electronic format.
• Under Section 101(d) and (e), however, an electronic contract could be deemed unenforceable or invalid if the electronic record was not capable of being retained and accurately reproduced for later reference.

Mortgages, auto finance and consumer lending all have special compliance requirements for implementing paperless workflows. A solution to identify an electronic signer and create an evidence trail is a necessity. “You must ensure that you are creating that trail of evidence and capturing all the right information, at all the right times in the process,” explained Jacobs. He shared the established best practices for creating legally admissible and legally enforceable electronic documents:

Authentication – In person, this could be a photo ID, such as a driver’s license. There are many things available remotely as well, such as front line authentication – name and password. It could be as granular as ID verification for someone who is accessing remotely.

Consent – This is part of the ESIGN law, which requires that an individual’s consent be captured, documenting that he or she understands the technology being accessed. Without consent, it is not a legally admissible and legally enforceable contract.

Opt-Out – Everyone must be given the option to sign on paper.

Signature with Intent – This involves being able to prove that the person who applied consent to the document actually intended to do so. There are reasonable assumptions that can be made when a customer is applying a wet signature to a paper that cannot be made in the digital world. This is typically done through the use of statements throughout the contract.

Copy Access/Distribution – Being able to show that due diligence has occurred and that the signer has been given access to copies of the contract after it has been signed.

Tamper Seal – This is a safety feature, which should happen during the process of using a digital signature to ensure the information in a document exists today just as it did the day the customer provided their signature on the document. The digital seal protects the customer data within the document and controls who has access to the data and the customer’s information post closing. This is usually done with server-side digital signatures – a central server that locks down and seals the document. If someone attempts to break in and alter the document, it will break the seal, rendering the document invalid. There will be evidence of any attempt to do this. From an auditing perspective, it should be demonstrable that the customer had the ability to review the document, knew what they were signing, and intended to sign it.

eAsset Management – This is another piece of the electronic process that is typically used in reference to assets with some sort of financial value.

Jacobs emphasized the importance of managing a document and protecting the customer data it contains through its life cycle. To use electronic documents, constant control over the process post-closing must be maintained, protecting access to the data. The ability to protect the data going forward must also be evidenced. A key component to this is being able to review all steps throughout the process. From an auditing point, Jacobs explained that there should be evidence that the customer had the ability to review the document, knew what they were signing and they intended to sign. The panel emphasized that ensuring each step is taken throughout the process is important, not only from a best practices standpoint, but also from a legal admissibility and legally enforceability perspective.

Consumer Demand

“Jacobs estimated that more than one million eSignatures were processed through various portals in 2014. “Dealers have the ability to sign eMenus on the iPad and Jacobs says this has had a phenomenal effect in the F&I office. “Customers would rather view a contract on the iPad than have a conversation. By using the iPad with the eSignature, we have experienced a $550 dollar lift in F&I (back-end profits) versus using a paper menu.”

Many F&I offices across the country use some sort of signing pad to capture signatures. In the past, it was about making things easier for the businesses. Our group of executives agreed; customer demand is the primary driving factor today. The customer wants to walk out of the F&I office in five minutes with their new vehicle and everything they need to protect it. The group predicted that in the future, more dealerships would take advantage of mobile solutions, allowing them to walk around the dealership, using an iPad or tablet.

“Customers today want things to be simple, quick and easy,” said Ronda Lewis, national sales director, Dealertrack. Dealertrack has offered eSignature since 2002 from a signing standpoint to contract submission. “Initially, we saw the elimination of errors. From an F&I standpoint, they can get that warranty immediately. The customer can take the car out Saturday afternoon, confident that the warranty company has already received their information and their vehicle is covered.”

“When the customer walks into the dealership,” added Jacobs, “they want it and they want it now. They want instant gratification; we have to be able to provide that to them. They want eSignatures. . . We are the ones who are a little behind the eight ball.”

Brent Allen, president, StoneEagle said all his clients are asking for it. “The customers are now this young generation and are online all day long everyday. They are ready for paperless and they want it.” But with penetration of eSignature on the actual insurance products only around 10%, Allen says they have had some clients who would rather not do it at all, simply because it is easier for them to go to one place. “The technology is there. Part of the gap is between F&I and the financial side. How do we bring them together? I know many companies are all working on a single signing ceremony that I think will be a very important piece.”

Kumar Kathinokkula, COO, F&I Administration Solutions, Inc., said he has had similar experiences with clients. He agreed with Allen, but said he believes the actual penetration percentage was even less than 10%.

Obstacles and Solutions

Brian Krasavage is the director of product management at ADP Dealer Services, a DMS provider that has used eSignatures for many years. He says from the dealers’ perspective, eSignatures are great, but what they really want is a completely digital deal – to eventually get rid of paper altogether. “This is a challenge that eSignatures alone can’t solve. Not all documents can be signed or even created electronically – the DMV is one of the biggest culprits in this regard. The goal of our eContracting system is to help dealers become entirely digital. That process entails everything from giving them the ability to create, customize and update forms, to providing an integral distribution network for the forms to get from the provider to the dealer, all the way through to the digital deal jacket – the electronic storage for archiving, saving accessibility, and of course the transmission or moving of those documents to whatever constituent needs to receive them. To enable them to go completely digital, non-digital documents can be scanned in, as can copies of driver’s licenses, insurance cards, etc. This helps reduce the overhead in the F&I office and improves the customer’s experience.”

Krasavage said ADP recently began piloting a new signing process, which is an improvement from their current hybrid of digital and paper. The new process no longer requires that papers are printed and is designed to be hardware independent. “Today, the solution requires the F&I manager to print the documents and then dance between paper and digital – it uses a signature pad and the customer doesn’t actually see their signature on the document until everything is printed out. Internally, we call the new system ‘see what you sign.’ The electronic document is shown on the display of whatever device they are using at the dealership. The difference is the customer can actually see their signature on the screen after they have applied it either with their finger or a stylus, instead of having to wait to see it on a printed copy.”

Some dealers are looking to a dual monitor solution; so one monitor faces the customer. Using iPads or tablets also allows dealers to change their process. Some dealers are experimenting with F&I selling outside of the F&I office – doing more with the sales person in the front area of the dealership, in order to reduce the amount of time the customer has to spend in the F&I office.

Lewis said everyone has a fear of change. “Just getting dealers and lenders ready for eSignatures was a challenge. We are trying to get away from the tethered signing pad so you can be mobile throughout the dealership. The signing pad is just another piece of equipment that could break. Doing an eContract versus a regular deal is much simpler, but it still involves a training process within the dealership. We have to ensure that we are able to deliver that digital deal jacket to the aftermarket provider and the lender in real time, so the customer has the best overall experience. The consumers are ready; we’ve just got to be sure we can provide the tools for them.”

In addition to most DMVs lagging behind in the race to become paperless, there are also a number of banks that are not yet equipped to take the plunge. Lewis says these are two of the biggest challenges. “It will require effort for legislation to be approved that will allow us to move forward with this.” She said she could personally imagine one day being able to do an entire traction online without a customer even stepping foot in a dealership, with the car delivered directly to the customer’s home.

On the administration side, Allen said the improvement in efficiency is huge when it comes to electronic processes. “If you are still getting paper, think about all the people needed to process everything. There are companies that are having record months and they are out having to hire for this reason. The idea of making things as electronic and electronically consumable as possible means better efficiencies. Admin companies can bring in more business without having to grow their staff.”

Krasavage brought up the complexities and processes that have been built around paper. “If you go to some captive lenders, they have large rooms with tables set up and their day starts when the Fed Ex truck rolls up. They will have to reengineer their processes. There is some IT development involved, but many of us offer services that can make that easy for them, so I don’t think that is a real obstacle.” He says the biggest challenge is adjusting business processes, “Instead of having someone meet that Fed Ex truck, they need someone who knows know how to get into the systems that are used to build paperless business processes.”

The lack of standardization in dealers’ digital forms requires an inordinate time investment to initially establish electronic processes. “This is one of the barriers in the adoption of eSignatures,” Krasavage explained, “When we move a dealer over to digital contracting, we spend around 85% of our time on the dealer’s site dealing with forms. . . There is no standardization in the design of forms amongst companies.”

Authentication

“There are a million transactions in dealerships that are signed electronically in a face-to-face setting,” says Jacobs, “and probably a hundred times in remote transactions.” The typical method for which documents are executed remotely includes an email invitation with a link to a secure online portal. This could be hosted by a vendor or it could be on the company’s website, and could be accessed through a phone, PC or tablet. Authentication is very important.

Jacobs listed several methods to reasonably authenticate signers when they are not available to sign face-to face. Front line authentication is a user name and password - something that is unique to the signer and the transaction that they are about to access. In many cases, the password could be provided verbally, via the telephone or in person. It could also be sent via text to the signer’s cell phone. This is referred to as multi-factor authentication process. “So in order for you to have access to the transaction, not only did you have to login to have access to the email I sent, you also have to have access to the mobile device that I am sending the text to. It can all get very granular,” explained Jacobs.

In financial services, identification verification tools are used to put someone through additional exams to further authenticate them. They utilize out of wallet questions – meaning the data requested is not available easily to anyone outside the user, and is not likely to be found in that person’s wallet. Questions such as “Which of these zip codes did you live in in 1988?” or “Which of these three mortgage companies do you currently have a mortgage with?” are typical out of wallet questions.

Some companies offer options for providing an online signature. Others prefer consistency so they limit the options. In most cases when a customer signs remotely, once they have been driven to the online portal, the process takes around two-minutes. They review the document, apply their online signature (using a finger or a keypad to type it in), then they close the portal and the transaction is done.

Lewis pointed out that credit applications have used electronic signatures for quite some time. She recommended ensuring that the dealers you work with have an identity theft program, and a compliance solution – and then take the time to review them. “They can provide signed forms stating that they have everything in place and are doing their due diligence verifying consumers are who they say they are.” Taking the time to ensure this, as well as other security measures are in place and fully functioning is now a foundational part of the electronic process that is quickly becoming the norm.

Kathinokkula, said if questions arise about electronically signed documents, typically they are not asking if the customer signed, rather they are asking about the content of the document itself. This is why providers must have the ability to produce the document after the sale. He emphasized that whatever technology is being used, it needs to be supported by the administration company.

The Cost of eContracting 

There are many benefits in using digital documents, but the transition to electronic processes comes with a cost. However, the reduction in administration costs that typically follow a volume increase can help pay for the electronic process.

Allen pointed out the significant value and expense involved with an electronic delivery. “It may be per contract or per rooftop, but there is going to be an expense for the process. There is no doubt about that. The problem is, as TPAs, you can’t absorb the cost, so you end up adding X number of dollars to the price of your agreement in order to cover the cost. So in reality, the customer is actually paying. This makes your product a little bit more expensive than the next guy’s. I think the processes and reduced manpower that will be the result of eContracting are what we need to look at. Will the savings in these areas be enough to cover the cost? Probably not, but if we can make a dent in it, it will help. The cost of electronic delivery is inevitable - it just needs to be made palatable.”

Lewis said the real issue is not the cost for eSignatures, but is the cost to build out all the required forms. “Every time there is a change, there are entries involved that have to be redone.”

“Many of our dealers are getting more demanding with anything that is going to make it a better consumer process,” Lewis continued, “Essentially customer satisfaction, CSI, drives a lot of it. If you haven’t already seen this, I think you will in the future. When things are electronic, customer satisfaction goes up. I have heard more than once, ‘If you aren’t willing to do things electronically, then there are other providers that we can sell.’”

Lewis said the timing of moving forward with eSignatures depends on the partnerships between F&I providers, technology vendors, and dealers. “Working together and creating all the steps and processes, as well as getting buy in, all need to happen. As far as the technology goes, everyone agrees; we’re already there.”

“On the admin side,” Allen noted, “I think we are pretty much there. We are doing everything we can to help the pieces come together. A lot of us are just waiting on the dealer and the state.”

“For eSignatures to become more widespread, it is going to take connectivity in all directions,” concluded Lievrouw, “Ultimately, it is up to those whose systems have integration with third parties and lending institutions to move the process forward. The rest of us (third party administrators) are participants.”