A guide to successful business on the internet.
You used to sit down with your customer at a dinette on the floor, go over the rental agreement section by section, and then get the customer’s signature, initial payment, handshake, and maybe even a hug. If you were in a hurry or having a bad day, you might drop a clipboard with the agreement on it in front of the customer and tell him to read it, sign it at the “X” and bring it up to the counter when he was done. The point is that you actually met your customer. You looked him in the eye. You noticed how he was dressed, and importantly, you got the customer’s signature in ink on a real piece of paper, a piece of paper that locked both you and the customer into the deal.
Of course, you still do a fair amount of business that way—maybe a lot, maybe most, depending upon where you are, but you are likely also doing business with people you have never met and may never meet. It’s that darn internet, the bane of all retail everywhere. However, you have had to adapt to the modern rules of commerce or you run the very real risk of perishing.
By now, you almost certainly have a website, however sophisticated or rudimentary it may be. It is where consumers likely first see your products. You can hope that their curiosity, need, want, lust, live chat, FAQ’s, or what have you, will bring them into the store to touch and feel in real life what is on the screen, to sit on the sofa or actually lie on the mattress, engaging all of their senses and making it all the more likely that they will make a choice and you will close a deal. Some of those website viewers, however, will not want to come to the store. They will not want to look you in the eye and have a conversation about your products, and their numbers grow daily. Instead, they prefer to do business at a distance—at arms’ length on the internet. And you want to accommodate those customers in every way possible. So, if they want to read about the deal on a smart device and send payment via PayPal, ACH, or credit card, you want to make that transaction as easy and seamless as possible. Deliveries are deliveries, after all.
If you have spent your professional life making sure that you had the customer’s signature in ink on the rental agreement, with the original in the customer’s file and a signed copy with the customer, how do you deal with an electronic transaction that is made up of electronic data bits instead of paper? How can you make sure that the transaction, consummated as it is in the ether-sphere will be enforceable if ever you need to enforce it?
THE LAW OF E-SIGNATURES
It is a fair question that the government has answered in the Electronic Signature in Global and National Commerce Act (E-Sign) 15 USC sections 7001-7006 a federal law enacted in 2001 and the Uniform Electronic Transactions Act (UETA), a uniform law drafted in 1999 and enacted by the states. There is a complicated interplay between these two sets of laws that is beyond the scope of this article. Suffice it to say that they are similar in many, but not all regards, and that one law or the other controls in each state. Both sets of laws are designed to be technologically neutral, intending that electronic signatures be neither better nor worse than traditional signatures on paper. The minor variations should have little impact on standard RTO transactions made electronically.
These laws were enacted to insure that “a signature cannot be denied legal effect solely because it is in electronic form.” An electronic signature is defined as 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 document.
There remain all of the legal defenses to the enforceability of a contract, e.g., fraud, duress, unconscionability, deceptive trade, etc., and even the electronic signature itself can be challenged if it can be proven that it was not the act of the person against whom enforcement is sought, i.e., the customer if you have to sue him to get your stuff back.
The laws acknowledge that there are lots of ways that a document can be signed electronically. It can be a name typed at the end of an email. It can be the logo of the person or business in the header of an email. It can be a PIN number or password unique to the sender, such as those used in the protocols for credit or debit card transactions. It can be a mouse click at a prescribed spot on a webpage where the text reads, for example, “I agree to the terms and conditions of this Agreement.” It can be the digitized image of a handwritten signature attached to an electronic document. It can be a sound created by hitting the pound key on a keypad at the appropriate time, and the list goes on. Nor is the list likely to be completed any time soon, as it continues to evolve with the technology. The time may come when electronic signatures can be accomplished with biometrics, for example with fingerprints or retinal scans.
An aspect of electronic signatures important for rental dealers is that they clarify exactly what the customer is signing and agreeing to electronically. The place for an electronic signature must be at the bottom of the document to be signed. There is abundant case law where courts have refused to enforce a contract or a provision, often an arbitration provision, when the electronic signature appeared before the document was available to the signer or where the signer had to go to another webpage or another site to access the document being signed.
Some RTO transactions may require more than one signature from the customer. The customer may have to fill out a rental application or order form and then verify that the information submitted is true and correct. The customer may be asked to consent to various things as part of the transaction, for example, consent to receiving text messages or robo-calls on a cell phone about the account. The customer may have to be shown liability damage waiver information, coverages and costs, before being presented with an RTO agreement to sign, and may have to verify that the LDW information was received in a timely manner.
PRICE TAGS
Then, in some states, and in some business models, there is the sticky issue of price tag disclosures for RTO products. It is not an issue for dealers with their own showrooms, but as the world turns, there are increasing numbers of rental dealers without showrooms. They are variously doing business entirely on the internet or alternatively with some kind of kiosk model through brick-and-mortar retail stores.
In the 2001 study of the RTO industry, the Federal Trade Commission lamented that too often, an RTO customer did not see the relevant financial information about the transaction until presented with an agreement to sign. It would be far better for consumers, according to the FTC, if those consumers had the ability to “shop around,” being able to compare RTO prices with other RTO dealers and perhaps with retailers for the same or similar products as well. Once consumers are sitting down to sign an agreement, it is too late to do any comparison shopping as the decision to do the deal had already been made.
It is easy enough to disclose the pertinent price tag financial information about the transaction on a dealer’s website: cash price, rental rate, rental term, total cost, new or used, and in a couple of states, the “cost of lease services” or “cost of rental.” Specific terms for aspects of the transactions are required by law in some states, “Retail Value” instead of cash price in West Virginia, for example.
Dealers renting property from their websites can provide price tag information electronically for each item they show. Dealers intent on having an elegant, easy-to-navigate, and inviting website occasionally grumble at having to clutter up their site with “too many numbers.” The prevailing wisdom seems to be that the price tag information, if it is not to be shown alongside the product, should not be more than one click away. After the customer has had a chance to view the product and its features and benefits and then to see the price tag information, the dealers should get the customer’s electronic signature acknowledging that he saw the price tag information before being presented with a completed rental agreement to sign.
It makes sense both legally and logically to have the customer check an “I agree” or “I consent” box several times during the course of completing a transaction electronically rather than just once at the very end.
RETRIEVAL AND REPRODUCTION ISSUES
You know already that not everybody has ready access to the internet. Some customers are getting on the internet for the very first time with a computer they are renting from you. Statistics show that the higher the income and the higher the level of education the more likely it is that the consumer has broadband access. Congress recognized this truth when enacting the E-Sign law and put in additional requirements for electronic consumer transactions (1) to ensure that consumers understand they are consenting to do business over the internet, (2) to provide consumers the ability to request paper copies of anything they sign, and (3) to provide consumers the ability to cancel the consent. The purpose of the consent requirement is to insure that consumers who have agreed to do business electronically can actually access, read and download the documents they are signing.
When conducting business with consumers over the internet, they must be given the following information in a “clear and conspicuous” manner. Most often, this information will appear in the terms and conditions for using a merchant’s website. Ideally, this information will be prominently displayed and not buried in the midst of the other fine print that relates to the site.
- Consumers have the right to get a copy of the document(s) in non-electronic form.
- Consumers have the right to withdraw consent to do business electronically and must be given the process and consequences for withdrawing consent.
- Consumers must be able to identify easily the transaction(s) to which the consent applies.
- Consumers must be given the procedures for updating information needed to contact them electronically.
- Consumers must be given the information for obtaining a paper copy of the transaction(s) and whether there are any fees for getting a paper copy.
- Consumer must be given notice of the hardware and software requirements for accessing and saving electronic documents.
- Finally, consumers must consent to doing business electronically in a manner that reasonably demonstrates that the consumer can access information in the electronic form that will be used to provide the information.
The rules go on to require that electronic records, broadly defined, including rental agreements and anything else the customer signs, must be in a form that can be retained, opened, read, and accurately reproduced by all parties. The records must be reproducible in their original form and not be subject to change each time they are retrieved.
It makes sense both legally and logically to have the customer check an “I agree” or “I consent” box several times during the course of completing a transaction electronically rather than just once at the very end.
Electronic documents must be formatted in accordance with any state law rules relating to type size or font. The formatting must allow the documents to be printed in accordance with any applicable law. A number of state RTO statutes dictate minimum type size requirements. Some go on to require that certain disclosures be made in bold-face type. Still, others dictate the placement of certain disclosures on the page.
Internet transactions are here to stay and their use and importance grow daily. Successful rental dealers are already exploiting the technology and accommodating customers who want to rent from the internet. It is a manageable process and can add substantial BOR to the business. Learn the rules and get on board. The internet awaits.
Ed Winn III serves as APRO General Counsel. For legal advice, members in good standing can email legal@rtohq.org.
