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Last Updated: Nov 17th, 2008 - 12:30:30 |
Digital Signature and Electronic Authentication Law (SEAL) of 1998 (Introduced in Senate)
S 1594 IS
105th CONGRESS
2d Session
S. 1594
To amend the Bank Protection Act of 1968 for purposes of
facilitating the use of electronic authentication techniques by
financial institutions, and for other purposes.
IN THE SENATE OF THE UNITED STATES
February 2, 1998
Mr. BENNETT introduced the following bill; which was read twice and
referred to the Committee on Banking, Housing, and Urban Affairs
A BILL
To amend the Bank Protection Act of 1968 for purposes of
facilitating the use of electronic authentication techniques by
financial institutions, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the `Digital Signature and Electronic Authentication Law (SEAL) of 1998'.
SEC. 2. FINDINGS AND PURPOSES.
(a) FINDINGS- Congress finds that--
(1) technology has had a tremendous impact on the
manner in which banks and other financial institutions conduct their
businesses, and has affected virtually all aspects of their operations;
(2) such changes relate not only to the creation,
retention, and delivery of documents and other information, but also to
the receipt and payment of funds, the purchase and sale of goods and
services, and other aspects of the ability of a financial institution
to communicate with and service its customer base;
(3) financial and other transactions will increasingly
be carried over open electronic networks such as the Internet, and
through other methods where the identity of the parties participating
in such transactions may not be easily verifiable and where there is a
need to assure that information transmitted among the parties has not
been altered;
(4) banks, by virtue of their role in the Nation's
payment system, their relationships with their customers, and through
the prudent use of technology, are well placed to facilitate financial
transactions over such electronic media as the Internet;
(5) the parties to such financial and other
transactions may previously have entered into agreements or system
rules pursuant to which the transactions subsequently take place (known
as `closed system transactions');
(6) if the formation of system rules and agreements are
otherwise valid and effective under applicable law, such as under State
contract law, the parties should be able to use electronic
authentication under the terms and conditions of those system rules and
agreements, to help ensure that the development of electronic
authentication will be appropriately market driven;
(7) premature, conflicting, or unwise regulation can
inadvertently discourage the use of technology in financial
transactions, can inhibit the development of electronic commerce, and
can reduce security in financial transactions;
(8) it is appropriate for Congress to enable a
framework under which banks and their subsidiaries and affiliates can
participate in electronic commerce and electronic banking without undue
premature or unnecessary regulation, but under which appropriate
oversight is provided; and
(9) in particular, it is appropriate for the Board of
Governors of the Federal Reserve System to consult with the other
Federal and State banking regulators and report to the Congress
regarding the use of electronic authentication techniques, in order to
facilitate electronic commerce and electronic banking, and to study the
need for and wisdom of consumer protection in the context of the
developing area of electronic commerce.
(b) PURPOSES- The purposes of this Act are--
(1) to facilitate the participation by financial
institutions in the burgeoning area of electronic commerce and
electronic banking;
(2) to ensure that the interests of consumers are adequately protected; and
(3) to avoid the effects of premature or conflicting
regulation that could inadvertently impede the development of
electronic banking and commerce or imperil the security of electronic
banking and commerce.
SEC. 3. AMENDMENTS TO THE BANK PROTECTION ACT OF 1968.
(a) DEFINITIONS- Section 2 of the Bank Protection Act of 1968 (12 U.S.C. 1881) is amended--
(1) by inserting `(a) FEDERAL SUPERVISORY AGENCY- ' before `As used';
(2) in paragraph (4), by inserting `associations' before the period; and
(3) by adding at the end the following:
`(b) AFFILIATE- The term `affiliate' has the same meaning as in section 2(k) of the Bank Holding Company Act of 1956.
`(c) APPROPRIATE FEDERAL BANKING AGENCY- The term
`appropriate Federal banking agency' has the same meaning as in section
3 of the Federal Deposit Insurance Act, and includes the National
Credit Union Administration with respect to an insured credit union
under the Federal Credit Union Act.
`(d) ASSOCIATION- The term `association' means an
organization or association engaged in receiving, sending, and settling
payment transactions and instructions, and includes credit and charge
card associations, payment clearinghouses, and automated teller machine
networks in which insured depository institutions are members or
stockholders or in which they participate, or which are supervised and
examined by 1 or more of the Federal banking agencies.
`(e) BANK HOLDING COMPANY- The term `bank holding company'
has the same meaning as in section 2 of the Bank Holding Company Act of
1956.
`(f) DOCUMENT- The term `document' means any message,
instrument, information, data, image, text, program, software,
database, or the similar item, regardless of how created, if such item
can be retrieved or displayed in a tangible form.
`(g) ELECTRONIC AUTHENTICATION- The term `electronic
authentication' means a cryptographic or other secure electronic
technique that allows the user of the technique--
`(1) to authenticate the identity of or information associated with a sender of a document;
`(2) to determine that a document was not altered, changed, or modified during its transmission to a recipient; or
`(3) to verify that a document received was sent by the identified party claiming to be the sender.
`(h) FEDERAL BANKING AGENCY- The term `Federal banking
agency' has the same meaning as in section 3 of the Federal Deposit
Insurance Act, and includes the National Credit Union Administration.
`(i) FINANCIAL INSTITUTION- The term `financial institution' means--
`(1) an insured depository institution and any branch, representative office, or subsidiary thereof;
`(2) a bank holding company and any subsidiary thereof;
`(3) an affiliate of an insured depository institution;
`(5) a foreign bank maintaining an agency or branch (as
such terms are defined in section 1(b) of the International Banking Act
of 1978) in the United States; or
`(6) any entity that is not described in paragraphs (1)
through (5) that is a financial institution, as defined in section 903
of the Electronic Fund Transfer Act, or a card issuer, as defined in
section 103 of the Truth in Lending Act, but only to the extent that
the transactions of such entity are subject to those Acts, respectively,
that affirmatively elects to be subject to the provisions of
this Act by providing appropriate notice of such election in accordance
with any commercially reasonable practice.
`(j) INSURED DEPOSITORY INSTITUTION- The term `insured
depository institution' has the same meaning as in section 3 of the
Federal Deposit Insurance Act.
`(k) STATE BANK SUPERVISOR- The term `State bank
supervisor' has the same meaning as in section 3 of the Federal Deposit
Insurance Act.
`(l) SUBSIDIARY- The term `subsidiary'--
`(1) has the same meaning as in section 2(d) of the Bank Holding Company Act of 1956; and
`(2) includes a `subsidiary', as defined in section 23A(b)(4) of the Federal Reserve Act.'.
(b) ELECTRONIC COMMERCE- The Bank Protection Act of 1968
(12 U.S.C. 1881 et seq.) is amended by adding at the end the following
new sections:
`SEC. 6. ELECTRONIC AUTHENTICATION OF DOCUMENTS.
`(a) ELECTRONIC AUTHENTICATION OF DOCUMENTS, INFORMATION, AND IDENTITY-
`(1) IN GENERAL- A financial institution may use
electronic authentication in the conduct of its business if it has
entered into an agreement regarding the use of electronic
authentication with any counterparty, or if it has established a
banking, financial, or transactional system using electronic
authentication.
`(2) APPLICABLE RULES- The establishment and use of
electronic authentication pursuant to this section shall be valid
according to the relevant agreements or system rules.
`(1) IN GENERAL- The appropriate Federal banking agency
or the appropriate State bank supervisor may preclude, by regulation or
order, an insured depository institution or a subsidiary or affiliate
thereof, or other institution subject to its jurisdiction, from using
electronic authentication in the conduct of its business if it
determines that--
`(A) such use would not be consistent with safe and sound banking practices; or
`(B) such use would threaten the safety and soundness of the institution, subsidiary, or affiliate.
`(A) IN GENERAL- No financial institution shall--
`(i) be regulated by, be required to register with, or be certified, licensed, or approved by; or
`(ii) be limited by or required to act or operate under standards, rules, or regulations promulgated by,
a State government or agency or instrumentality
thereof with regard to the use of electronic authentication, including
acting as a digital certification authority or performing a similar
role, pursuant to this Act.
`(B) LIMITATION ON FEES- No State may--
`(i) impose a fee with respect to electronic
authentication services performed by a financial institution subject to
the provisions of this Act; or
`(ii) impose any required minimum fee or
otherwise limit the fee that may be charged by a financial institution
with respect to electronic authentication services subject to the
provisions of this Act.
`(C) OTHER REGULATORY AUTHORITY- Nothing in this
subsection precludes a State bank supervisor from regulating a
State-chartered financial institution that is otherwise subject to its
jurisdiction.
`(D) CONSUMER PROTECTION- Nothing in this section
impairs the rights afforded to consumers under State general consumer
protection laws.
`SEC. 7. CONSUMER PROTECTION.
`Nothing in section 6(a) shall be construed to impair the rights afforded to consumers under--
`(1) the Truth in Lending Act or the Electronic Fund
Transfer Act, or the implementing regulations of the Federal Reserve
Board thereunder applicable to electronic funds transfers from a
consumer account or extension of credit to consumers; or
`(2) any State law of a similar nature or purpose.'.
SEC. 4. FEDERAL RESERVE BOARD STUDY.
(a) REPORT- Not later than July 1, 2000, the Board of
Governors of the Federal Reserve System (hereafter in this section
referred to as the `Board'), in consultation with the Federal banking
agencies and State bank supervisors, shall report to the Congress
regarding the use of electronic authentication under section 6 of the
Bank Protection Act of 1968, as added by this Act by financial
institutions.
(b) CONSIDERATIONS- In preparing the report required under subsection (a), the Board shall include consideration of--
(1) the appropriateness of applying the consumer
protection provisions of the Truth in Lending Act, and the Electronic
Fund Transfer Act, or the implementing regulations of the Board
promulgated thereunder, to such transactions;
(2) whether protections for consumers should be changed
in light of the experience of financial institutions and consumers in
transactions where electronic authentication is used in connection with
third-party assurances; and
(3) the need for consultation and coordination with
other nations concerning the international use of electronic
authentication by financial institutions and others, with the purposes
of--
(A) encouraging simplified regulatory governance,
foreign recognition of electronic authentication under this Act, and
United States recognition of foreign electronic authentication;
(B) encouraging the greatest possible interoperability across borders;
(C) imposing the least possible regulation consistent with security and safety and soundness considerations;
(D) promoting the smooth functioning of the payments system; and
(E) facilitating the opportunity for financial institutions to participate freely and fairly in foreign markets.
(c) INCORPORATION OF DEFINED TERMS- Any term used in this
section that is defined in section 2 of the Bank Protection Act of 1968
(as amended by this Act) shall have the same meaning as in that section
2.
SEC. 5. RULES OF CONSTRUCTION.
(a) EFFECT ON USE- Nothing in this Act or the amendments
made by this Act may be construed to limit the right of any financial
institution or other entity to use electronic authentication or other
authentication technique in the conduct of its business.
(b) EFFECT ON OTHERWISE LAWFUL AGREEMENTS- Except as
otherwise specifically provided, nothing in this Act or the Bank
Protection Act of 1968, as amended by this Act, shall be construed to
affect the validity of the formation of relevant agreements or system
rules in accordance with the provisions of otherwise applicable Federal
or State law.
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