Digital Signatures for Credit and Collections – A Best Practice

A digital signature is a cryptographic technique to provide authenticity, integrity, and non-repudiation of electronic documents or data. It is essentially an electronic version of a handwritten signature that provides assurance that the document or message has not been altered and was indeed signed by the claimed sender.

A digital signature is created using a combination of public and private keys. The sender uses their private key to sign the message, and the receiver uses the sender’s public key to verify the signature. This process ensures that only the intended recipient can read the message and that the sender cannot deny signing it.

Digital signatures are commonly used in industries such as banking, healthcare, legal, and government sectors to authenticate electronic transactions, contracts, and other important documents.

Business Case for Digital Signatures in Credit and Collections

Use digital signatures to streamline and speed up credit and collection agreements. Some are still uncertain whether electronic signatures are binding in the United States and Globally,  but using e-signatures has become routine and is valid for most transactions. The following information is provided from U.S Government websites and our Smyyth companies’ corporate e-signature policies.

E-signatures have eliminated the hassle of completing commercial transactions, including use in Credit Applications and credit and collection agreements, to an extent that going back to faxes and emailed documents would be unthinkable for routine transactions. If your company is considering new credit risk software, collection software, or AR management software, consider including e-signatures in your processes. You should include all the standard company forms as templates within the digital signature system you decide on. Collection agencies also routinely use digital signing to confirm debt payment plans, as well as for creditor agreements.

The legality of Digital Signatures

Electronic Signatures in Global and National Commerce Act (E-Sign Act) and The Electronic Signatures in Global and National Commerce Act (E-Sign Act signed into law on June 30, 2000, provide a general rule of validity for electronic records and signatures for transactions in or affecting interstate or foreign commerce. There are four basic parts required for an electronic signature to be recognized.

1. The parties must intend to sign, just as with any written contract.
2. The parties must agree to do business electronically. For businesses, this can be shown by the circumstances of the interaction. Consumers, however, must affirmatively consent to use electronic records and receive related consent disclosures.
3. The e-signature system must capture and keep the record that reflects the process by which the “signature” was created or generate a graphical or textual statement proving it was executed.
4. The United States Laws require that the e-signature records be capable of retention and reproduction by the parties.

The E-SIGN Act solidified the use of electronic records and electronic signatures in commerce by confirming that electronic records and signatures carry the same weight and have the same legal effect as traditional paper documents and wet ink signatures. Both laws provide the following:

• No contract, signature, or record shall be denied legal effect solely because it is electronic.
• A contract relating to a transaction cannot be denied legal effect solely because an electronic signature or record was used in its formation.

Note: We do not provide legal advice, and we always recommend you consult with your counsel if you have any concerns. Also, many countries have specified certain types of documents or that are not appropriate for e-signatures, including wills and trusts, powers of attorney, and declarations under oath.