November 15, 2014

Yet Another Reason to Handle Consumer Electronic Consents Correctly

From time to time, clients balk when I describe the components of an effective consumer consent to an electronic transaction.  They say "I've seen lots of other websites, and they don't require this." 

They are correct, in part.  Most websites do not do what I advise my clients to do, because most websites have deficient disclosures and consent language.  Most of the time, these do not result in anything catastrophic.  But that does not make it legal...or smart. 

One aspect of consumer electronic transactions that people question most often is affirmative consent.  They ask whether it is truly necessary to provide detailed disclosures and obtain affirmative consent from consumers when entering into agreements through electronic means.   Affirmative consent means that the consumer expressly agrees to the terms, or "opts in."  An example of affirmative consent is the following:
"By clicking the button labelled 'Accept' below, you agree to the terms and conditions of this Agreement and acknowledge that you have read and understand the disclosures provided above."
Most businesses would generally prefer negative consent, also referred to as "constructive" consent or "opt out."   An example of negative consent is the following:
"By using this website, you are agreeing to these Terms and Conditions."
Obviously, negative consent is easier for businesses to handle than getting affirmative consent.  The question, however, is whether a negative consent is effective for all purposes.

The (federal) E-SIGN Act and the (state) Uniform Electronic Transaction Act require that if any other statute, regulation, or rule requires that a consumer be given a document or disclosure in writing, then in order to for a consumer to effectively agree to receive it in electronic format, the consumer must affirmatively consent after having been given very specific disclosures.  In some circumstances, it may be difficult to identify a specific law requiring a written disclosure in connection with the contemplated transaction.  You may think, "we are not under any legal obligation to give any notices or disclosures to these customers after this transaction."  However, there are a large number of disclosure requirements contained within the millions of pages of law affecting consumer transactions.  Just because you can't think of one off the top of your head doesn't mean none exist.  For this reason, I almost always advise my clients to obtain affirmative consent from consumers for online agreements.

In this post, I'm going to give you a real-world example of a situation in which obtaining a proper consumer electronic consent could save a lot of money:

ABC Corp. (fictional) sells products and services to consumers in North Carolina through its website and the telephone.  It has collected information from tens of thousands of consumers over the past few years, and stores that information on its database on its own server.  Included in the information are the consumers' credit card numbers (so that regular customers will not have to provide all of their information with every order).  The credit card numbers are not encrypted on the database.  ABC Corp. becomes aware of an incident of unauthorized access to its database.  Customer information likely has been accessed, and the available information indicates that the person who accessed the information has nefarious intent. 

Under North Carolina law, ABC Corp. is obligated to notify each consumer of the data security breach.  The North Carolina Identity Theft Protection Act says that ABC Corp. can notify the consumers via email only if the consumer's consent has been properly obtained in accordance with the E-SIGN Act.  If ABC Corp. has records of consumers' email addresses, but has not obtained the proper consent to provide subsequent legally-mandated notices by email, ABC Corp. cannot satisfy its obligations by providing the notice by email.  Instead, the Identity Theft Protection Act requires that the notice be provided in hard copy (if mailing addresses are available).  In this situation, because ABC Corp. has failed to obtain consumer consent in the proper way at the outset, the cost of responding to a subsequent data security breach will be tens of thousands of dollars more as a result printing and postage costs alone. 

This is just one example of the many ways in which handling consumer consent carefully at the start of an electronic relationship with a consumer can pay off for a business later.

November 7, 2014

Public Service Announcement: "Combatting Financial Exploitation: A New Tool"

Regular readers of this blog know that preventing the financial exploitation of older or disabled folks is something that I am passionate about.  I've written and spoken on the topic frequently over the past couple of years.

This week, I had the privilege to join a distinguished panel of experts for a series of training webinars on combatting financial exploitation of the elderly and disabled.  The webinar was coordinated by the NC Administrative Office of the Courts (specifically, the inimitable Lori Cole), and included representatives of the NC Department of Justice (the ever-risible Raj Premakumar), UNC School of Government (the erudite Aimee Wall), NC Bankers Association (the staid Jan Dillon), and NC Department of Health and Human Services (the passionate triumverate of Nancy Warren, Renae Minor and LeShana Baldwin).  More than 300 participants registered, most of whom were lawyers, judges, clerks of court, financial professionals, and social services officials from all across North Carolina.

Here are a few quotes from participants who contacted us after the webinar to profide feedback:

"Thank you so much for all the great information I received with the combatting financial exploitation webinar class. This will help me to stay up to date with the new change." - an Assistant Clerk of Court

 "Thank you for an informative CLE!" - a County Attorney

 "Thanks for the program and the info!" - a County Attorney

 "The webinar today was a very good introduction." - an Assistant Clerk of Court

 "It was a very good program." - a Social Services Attorney

"The information was very helpful." - an Assistant Clerk of Court
For those who were unable to join us, a copy of the materials from the presentation is available here.

A video of the presentation will be available soon, and I will update this post to include it.

If you encounter circumstances that lead you to suspect the financial exploitation of an older or disabled person, whether in your professional life or your personal life, please report your suspicions appropriately. 


November 6, 2014

A Message to New North Carolina Lawyers

The following article was published by the NC Bar Association in The Advocate earlier this month.  If you know any newly-licensed lawyers in North Carolina, I encourage you to share it with them:

Welcome to the YLD
by Matt Cordell, Division Director

Welcome to the Young Lawyers Division, which is affectionately known as the “YLD”! If you are younger than 36 or in your first three years in the practice of law in North Carolina (regardless of your age), you have been inducted automatically into the YLD effective upon joining the North Carolina Bar Association. Make no mistake—despite the fact that admission did not require much effort on your part, YLD membership is something from which you should derive great pride. (Second-career lawyers tend to be eager to call themselves members of the Young Lawyers Division—a feeling you will understand one day if you do not already—but this is not the sort of pride to which I refer.) You have joined the ranks of a dynamic, transformative organization that will ask for your talent and enthusiasm and, in return, give you meaningful experiences, skills, and relationships. The YLD has a tremendous legacy of developing effective young lawyers and serving our communities in powerful ways. In this special issue of The Advocate, we hope to show you how the YLD makes a difference in the world and can make a difference in your career.

The Young Lawyers Division Yields Lasting Dividends
The YLD is the largest division of the NCBA, with 6,500 members. It is also widely acknowledged that the YLD is the most active service arm of the NCBA. It is the source of many of the NCBA’s service initiatives, and has provided an enthusiastic workforce to carry out virtually all of the Association’s service projects—service to our members, our neighbors, and our communities. The YLD’s heritage of service dates back to its founding in 1954 and is the first goal expressed in its mission statement:
To promote the general welfare of the public, advance the professional education and welfare of young lawyers, involve young lawyers in the activities of the NCBA, promote fellowship among all members of the bar, and advance the standards of both the legal profession and the administration of justice. 

On our strong backs rest the responsibility and opportunity to carry out the vital work of the profession for the public good. The YLD has risen to the challenge in many ways, and most of its 21 committees are oriented toward service. From Murphy to Manteo, YLD members are effecting positive change across our state.
The YLD is where the future leaders of the NCBA, the State, and the nation gain valuable leadership experience. This is evident from a brief summary of the accomplishments of the prior YLD chairs:
  • Six prior YLD chairs have become presidents of this Association.
  • One became president of the ABA.
  • Nine became NCBA Section chairs.
  • Seven chaired NCBA committees.
  • Two became president of the State Bar.
  • Two more took the helm of Legal Aid.
  • A significant number went on to hold public office.
To underscore the point, note that these accomplishments reflect only the Division Chairperson—one person each year. Scores of other YLD officers and committee chairs honed leadership skills in the YLD that enabled them to accomplish great things later in life.

The YLD is Important for Your Legal Development
Legal publications and the editorial pages of newspapers have recently made common knowledge something we in the profession have known for some time: many law schools do not fully prepare students for the practice of law. As a new lawyer, you need practical experience and opportunities to develop leadership and other skills. These can be acquired in countless ways through the YLD’s many committees. You can watch more experienced lawyers counsel clients, and practice doing so yourself, through Wills for Heroes clinics or Project Grace clinics. You can develop your public speaking skills through any number of committees and events. You also can sharpen your writing by joining for the Newsletter Committee. Take advantage of opportunities to hone a host of additional skills—advocacy, event planning, speaking, or drafting—while making a difference in your community. The YLD is where newly-minted lawyers acquire the skills and experience to lead their communities, organizations, the legal profession, and society.  
This brings me to another significant benefit of YLD involvement: relationships. I have made many great friends through the YLD, and continue to encounter exceptional people each time I participate in a YLD event. If you have not discovered it already, you will learn that relationships matter tremendously in your professional life, just as they do in your personal life. The YLD is a great way to meet the very best young lawyers in the state—young lawyers who are motivated, committed, and service-oriented…and fun to be around. Basically, if you want to make friends with the leaders of the future, it is easy to do. Sign up for a YLD committee or service project. You will be surrounding yourself with some of the best young minds and hearts in this great state. But, as LeVar Burton used to say on Reading Rainbow, “you don’t have to take my word for it.” Give it a try. If you don’t make friends with lots of other bright, friendly, committed young lawyers, we’ll refund your membership fee. (Your first year of NCBA dues have already been waived!)  
Matt Cordell practices in the areas of banking, corporate, and privacy law with Ward and Smith, P.A., and serves as a YLD Division Director. This bar year marks his eighth year as an active member of the YLD. He looks forward to meeting each of you at a YLD event soon.