Electronic Loan Transactions under Maine’s Uniform Electronic Transactions Act

By March 28, 2024 April 23rd, 2024 Banking and Financial Services

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In today’s digital age, electronic signatures have emerged as a significant consideration in commercial loan transactions. Maine’s Uniform Electronic Transactions Act (UETA) may provide a framework to permit electronic loan transactions. When it comes to the execution of various loan documents, including promissory notes, guaranty agreements, and security arrangements, among others, electronic signatures are generally permitted under both the UETA and the Uniform Commercial Code (UCC). While the law provides some flexibility, securing express written consent from all parties to the loan transaction prior to closing is strongly advised. However, control over electronic records, the requirements of which are outlined in the UETA, is essential for their validity and potential enforceability.

Despite these allowances, mortgages and other agreements involving real property and fixture collateral present unique challenges due to notarization requirements. While Remote Online Notarization (RON) offers a potential solution, the insurability of documents acknowledged under the RON and their acceptance by county recorders remains uncertain and should be handled on a case-by-case basis.

It is extremely important to note that as of the date of this article Maine courts have not taken up the issue of the enforcement of an electronic promissory note executed by electronic signature.  Courts in other jurisdictions where the UETA is in effect have taken up this issue, and their decisions may serve as a barometer with respect to how a Maine court may address this matter. However, it is ultimately impossible to predict with 100% certainty how Maine courts will address the requirements of the UETA.

In summary, while electronic signatures offer convenience and efficiency, careful consideration is required, especially for transactions involving real property. Each case warrants individual evaluation, weighing legal requirements against practical considerations. Embracing electronic signatures in commercial transactions necessitates a thorough understanding of legal frameworks and a cautious, tailored approach. Prior to incorporating electronic signatures into loan closing processes, it’s advisable to consult with attorneys specializing in this area to ensure a smooth transition. Attorneys in Perkin Thompson’s Banking and Financial Services practice are here to advise on how your financial institution could evaluate incorporating electronic signatures for your loan closings.

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David Johnson is the chair of the Banking and Financial Services practice, president of Maine Attorney’s Title Company, and a member of the Real Estate and Business & Corporate practices.

Andrew Hersom is a member of the Banking and Financial Services, Real Estate, and Government Services practices.