Legislative initiatives are being undertaken in New Jersey and Pennsylvania to join the growing list of states that have authorized the use of remote online notarizations (remote e-notarizations) by state-commissioned notaries. It remains to be seen whether either state will enact legislation and in what form.
Remote e-notarizations provide notary publics with the authority to acknowledge the signature or the act of an individual without that individual being physically present at the same location.
This client alert summarizes some of the key features of a pending New Jersey bill and a Pennsylvania bill introduced in the prior legislative session that is expected soon to be reintroduced in the current session. These bills raise a number of questions that need to be addressed before enactment to ensure that the benefits of remote e-notarizations are achieved and the integrity of the notarization process is preserved.
Over the last several years, a number of states have authorized notaries to perform remote online notarizations (remote e-notarizations) by which a notary public may acknowledge the signature or the act of an individual without that individual being physically present at the same location as the notary.1 A bill has recently been introduced in the New Jersey legislature, and a bill may soon be reintroduced in the Pennsylvania legislature, that would allow their respective states to join with other states in authorizing state-commissioned notaries to perform remote e-notarizations. Whether either state will enact legislation to effect such a result, and in what form, remains to be seen.
Why Are These Bills Important and Who Stands to Benefit by Their Enactment?
Background. Following the development in 1999 of the Uniform Electronic Transactions Act (UETA),2 both New Jersey and Pennsylvania, along with 45 other states, enacted versions of that uniform law. The New Jersey and Pennsylvania versions included Section 11 of UETA, which provides:
If a law requires a signature or record to be notarized, acknowledged, verified, or made under oath, the requirement is satisfied if the electronic signature of the person authorized to perform those acts, together with all other information required to be included by other applicable law, is attached to or logically associated with the signature or record.3
This provision permitted notaries to affix their electronic signature (e-signature) to an electronic document, thereby eliminating the traditional sign and stamp/seal requirements, but it did not eliminate any of the other requirements of state laws governing notaries, including, most significantly, the requirement that the persons whose signature the notary is acknowledging be physically present at that time before the notary. In today's hectic world, however, it is often inconvenient and/or impracticable, and in some circumstances, nearly impossible, for a person to appear and sign a document or take an oath before a notary. Moreover, because of technological advances that now permit any individual, no matter where he or she is located, to be "virtually" (albeit not physically) present in the same room with the notary, it no longer seems necessary to assure the integrity of the transaction for that individual to be physically present before the notary.
Pros and Cons. As to who may benefit by enactment of these bills, the answer is potentially any individual or representative of a business who needs to have his/her signature acknowledged and verified (i.e., to close on a house, obtain a personal or business loan, enter into a commercial transaction, etc.). The bills would allow these individuals to sign the critical transaction documents in whatever state or country they happen to be on the closing date. In addition, the bills should make the scheduling of closings easier and more certain than now, likely benefitting both sides to the transaction, including, specifically, the individuals and businesses that are requiring the notarizations to be performed, such as consumer and commercial lenders, mortgage companies, sellers of commercial and residential buildings, among others. Finally, notaries should benefit, at minimum, by no longer having to travel to a person's home or business to perform the necessary notarial acts, which many do now.
Unfortunately, there are drawbacks as well, that need to be carefully considered. Chief among these is the potential for fraud. Notaries that currently perform remote e-notarizations in the states that allow them typically use a method known as knowledge-based authentication or "identity proofing" to verify signers' identities. Under this method, signers are asked a series of questions about their personal background based on information obtained from various credit bureau databases. Reportedly, over the last few years, there have been many data breaches of sources used by these identity proofing systems.4 Any legislation that would authorize remote e-notarizations must therefore be carefully tailored to protect against fraud. They must ensure, at least to the extent that in-person notarizations do, that the individuals whose signatures are being verified are who they claim to be, and they must require the creation and maintenance of oral and visual records of every remote e-notarization that can provide competent evidence of the integrity of the process by which such verifications were obtained.
What's Ahead? As additional states join the remote e-notarization club, the pressures on New Jersey and Pennsylvania to do so as well will likely increase. As yet, however, the legislatures in both states appear to be proceeding cautiously. New Jersey has introduced a bill, but has not yet taken any action on it. Pennsylvania allowed a bill introduced in the last session to die, and is working toward reintroduction of a similar bill during this session, taking into account some of the feedback it received on the prior bill. Details concerning the New Jersey bill and the prior Pennsylvania bill are provided below. As these bills proceed through the legislative process, more changes can and should be expected, with no guarantees that either bill will become law.
The New Jersey Bill
The New Jersey bill, S-3147, dubbed the "Remote Online Notaries Public Act" (New Jersey Bill), was introduced in the New Jersey Senate on Oct. 22, 2018, and is based on model legislation proposed by the Mortgage Bankers Association (MBA) and the American Land Title Association (ALTA). An identical bill, A-4860, was introduced in the New Jersey Assembly on Jan. 15, 2019. The New Jersey Bill would authorize the State Treasurer (Treasurer) to adopt regulations to facilitate remote e-notarization, and to develop and maintain standards for remote e-notarizations, including but not limited to standards for "credential analysis" and "identity proofing." In developing these standards, the Treasurer would be required to review and consider standards established by the National Association of Secretaries of State (NASS) and national standard-setting bodies such as the Mortgage Industry Standards and Maintenance Organization (MISMO).
A brief summary of the New Jersey Bill is set forth below.
A critical definition in the New Jersey Bill concerns what it means for a person to "appear" or "personally appear" before a notary public authorized to perform remote e-notarizations (an Online Notary). This definition provides that such an event takes place not only 1) when the person is in the same physical location as the Online Notary and close enough to see, hear, communicate with, and exchange tangible identification credentials with the Online Notary, but also 2) when the person is interacting with the Online Notary by means of communication technology that complies with the bill's provisions.
"Communication technology" means an electronic device or process that allows a notary public physically located in New Jersey and a remotely located individual to communicate with each other simultaneously by sight and sound, and which, as necessary, makes reasonable accommodations for individuals with vision, hearing, or speech impairments.
"Credential analysis" is a process or service through which a third person affirms the validity of government-issued identification credentials (government IDs) through review of public and proprietary data sources.
"Identity proofing" is a process or service through which a third person affirms the identity of an individual by means of dynamic knowledge-based authentication such as a review of personal information from public or proprietary data sources, or analysis of biometric data.
Becoming an Online Notary
Section 5 of the New Jersey Bill provides that "a notary public or an applicant for appointment as a notary public under [the bill]" may apply to the Treasurer to be "appointed and commissioned" as an Online Notary. Section 6 of the New Jersey Bill provides that "[a] notary public commissioned in [New Jersey]" must register with the Treasurer before performing any remote e-notarizations.
These two provisions raise a number of questions that need clarification. For example, does the New Jersey Bill require New Jersey notaries to undertake a two-step process before they can perform remote e-notarizations – first, apply to the Treasurer to be appointed and commissioned as an Online Notary and, once so commissioned, register with the Treasurer – or is it sufficient for them to do one or the other? Or, stated another way, are "notary public[s] or ... applicant[s] for appointment as a notary public under [the New Jersey Bill]" and "notary publics commissioned in [New Jersey]" intended to describe two different groups of individuals or the same group of individuals? (Note in this regard that the New Jersey Bill only appears to provide a process for applications for appointment as an Online Notary, although it authorizes Online Notaries to perform both remote e-notarizations and notarial acts that public notaries may perform.) If the former, are the groups intended to be mutually exclusive or, if not, how exactly do they differ?
Application to be appointed and commissioned as an Online Notary. Section 5 of the New Jersey Bill states that to qualify to be appointed and commissioned as an Online Notary, applicants must 1) satisfy the qualification requirements for appointment as a notary public under the New Jersey Bill and the "Notaries Public Act of 1979" (N.J.S.A. 52:7-10 et seq), 2) electronically submit to the Treasurer an application in the form he/she prescribes, and 3) pay the required application fee. It also provides that the application must include:
the applicant's name to be used in acting as a notary public, and an email address for the applicant
a certification that the applicant will comply with the Treasurer's remote e-notarization standards
The only specific qualification that appears in Section 5 for appointment as an Online Notary is a requirement that the communication technology selected by the applicant conform to the standards for remote e-notarizations established by the Treasurer as mandated under the New Jersey Bill.
Registration to perform remote e-notarizations. Section 6 of the New Jersey Bill states that before registering, an individual must 1) complete a course of instruction, which consists of a number of hours specified by the Treasurer and includes content on notarial rules, procedures and ethical obligations pertaining to remote e-notarizations and in-person notarizations, and 2) pass an examination based on the course.
Registrants must 1) identify to the Treasurer the technology they intend to use in their operation (which must conform to the standards for remote e-notarizations established by the Treasurer as mandated under the New Jersey Bill), 2) post a surety bond if the Treasurer so requires, 3) submit a registration application, and 4) pay the required application fee.
The registration application must include:
proof of successful completion of the course of instruction and passage of the course examination
disclosure of any license or commission revocations or other disciplinary actions against the registrant
any other information, evidence or declaration the Treasurer may require
Authority Provided to Online Notaries
In addition to giving Online Notaries the same rights and privileges afforded to a commissioned notary public, the New Jersey Bill specifically authorizes Online Notaries to perform online notarial acts for persons physically located in New Jersey or remotely located. The latter includes persons physically located outside the United States, provided: 1) the Online Notary has no actual knowledge that making a statement or signing a record is prohibited within the jurisdiction in which the person is located, and 2) the person placing his/her signature on the electronic record confirms to the Online Notary that the requested notarial act and the electronic record (a) are part of or pertain to a matter that is to be filed with or is currently before a court, governmental entity or other entity in the U.S. or (b) relates to a property in, or a transaction substantially connected to, the U.S.
Performing Remote e-Notarizations
The New Jersey Bill indicates that to perform a remote e-notarization, an Online Notary must verify the identity of the person creating the electronic signature at the time the signature is taken by using communication technology that meets the requirements established by the Treasurer, and may do so based on either 1) his/her personal knowledge of the person, or 2) an image of the person's government ID (such as a passport or driver's license), which has been transmitted to the Online Notary using the communication technology and which contains the person's signature and photograph, plus a credential analysis of that government ID and identity proofing.
Obligations of Online Notaries
Online Notaries would be subject to numerous obligations under the New Jersey Bill. They must:
keep a secure electronic journal of notarized documents containing specified items of information concerning each remote e-notarization they perform in connection with a transaction or proceeding, for at least 10 years after the date of the transaction or proceeding
take reasonable steps to insure the integrity and security of remote e-notarizations, maintain a backup of their electronic record and protect the backup from unauthorized use
keep their electronic signature secure, use it only to perform online notarial acts and not allow it to be used by any other person
attach their electronic signature and seal to an online notarial certificate in a way that renders subsequent changes to the document evident
immediately report any loss, theft or vandalism of their electronic signature
verify that the communication technology for the remote e-notarization is secure from unauthorized use
include in the electronic certification information indicating that the remote e-notarization was completed online
once their commission is terminated, destroy any coding, disk, certificate, card, software or password that enables his/her electronic signature or seal to be affixed (e-signature mechanisms)
Use of Custodians
The New Jersey Bill permits Online Notaries to designate a custodian of the recordings of their remote e-notarizations. The custodian must comply with the standards set forth by the Treasurer, including procedures for the preservation of the audio and visual copies of the notarized documents and the Online Notary's electronic journal in the event the Online Notary dies, is adjudicated to be incompetent or has his/her commission terminated.
The New Jersey Bill would make it a crime of the fourth degree to knowingly obtain or destroy without prior authorization an Online Notary's e-signature mechanism.
The New Jersey Bill would become effective immediately upon enactment, but remain inoperative for 14 months thereafter, with the initial 12 months being allotted to the Treasurer to promulgate the necessary regulations.
The Pennsylvania Bill
Senate Bill 0595 was introduced in the Pennsylvania legislature on April 17, 2017. The bill was substantially amended and then re-reported as amended on April 17, 2018, but died at the end of that legislative session. The amended and re-reported bill is referred to here as the Pennsylvania Bill. A new bill is expected to be introduced during the 2019-2020 legislative session, which is expected to closely resemble the Pennsylvania Bill (with perhaps a few amendments to reflect certain changes made last summer by the Uniform Law Commission to its model bill). A summary of the Pennsylvania Bill is set forth below.
Similar to the New Jersey Bill, the Pennsylvania Bill effectively permits a remotely located individual to "personally appear" before a notary public by means of communication technology. The Pennsylvania Bill also defines "communication technology" and "identity proofing" essentially the same as how those terms are defined in the New Jersey Bill. Unlike the New Jersey Bill, however, the Pennsylvania Bill is not based on any proposed model legislation, and includes no provision for a notary performing a remote e-notarization to verify the remote person's identity based on "credential analysis."
Becoming an Online Notary
Also unlike the New Jersey Bill, the Pennsylvania Bill would not create a separate category of public notary authorized to perform remote e-notarizations. Instead, it provides that all Pennsylvania-commissioned notaries would be eligible to do so, provided that they notify the Pennsylvania Department of State (DOS) of their intention to perform remote e-notarizations and identify the communication technology they intend to utilize in their duties. No additional course of study, testing, application or registration would appear to be necessary, although the DOS could add certain requirements that do not appear in the Pennsylvania Bill.
Authority Provided to Online Notaries
The Pennsylvania Bill provides authority to Pennsylvania-commissioned public notaries to 1) perform remote e-notarizations (i.e., notarial acts using compliant communication technology) with respect to remotely located individuals, so long as the remote e-notarizations are performed in compliance with the requirements set forth in the Pennsylvania Bill (detailed in the following section), and 2) certify that a tangible copy of an electronic record is a true and correct copy of the electronic record. These authorities extend to situations where the remotely located individuals are located outside the United States, but only if:
the record a) is to be filed with or relates to a matter before a court, governmental entity, public official or other entity under the jurisdiction of the United States, or b) involves property located in the territorial jurisdiction of the United States or a transaction substantially connected with the United States, and
the act of making the statement or signing the record is not prohibited by the foreign state where the remotely located individual is located
Performing Remote e-Notarizations
To perform an remote e-notarization in compliance with the Pennsylvania Bill, the notary must:
have personal knowledge of the identity of the individual, have satisfactory evidence of the identity of the remotely located individual by oath or affirmation from a credible witness appearing before the notary, or be able to reasonably identify the individual by at least two different types of identity proofing processes or services
be able to reasonably identify a record before him/her as the same record in which the remotely located individual made the statement or executed the signature
create or have someone create an audio-visual recording of the performance of the notarial act
indicate on the certificate of notarial act required by Section 315 (relating to certificate of notarial act) and the short form certificate under Section 316 (relating to short form certificates) that the notarial act was performed by means of communication technology; for example, by adding to the short form certificate provided by Section 316a a statement substantially similar to "This notarial act involved the use of communication technology" or by complying with whatever regulations the DOS may adopt in this regard
Obligations of Online Notaries
Notaries performing remote e-notarizations under the Pennsylvania Bill would be required to:
utilize communication technology and identity proofing that conform to any standards the DOS may establish by regulation
retain, or arrange to have a repository retain on the notary's behalf, the audio-visual recording of each notarial act that the notary is required to create or cause to be created for at least 10 years after the recording is created or as otherwise required by DOS regulations (This requirement applies as well to guardians, conservators or agents of the notary, and personal representatives of a deceased notary.)
Pennsylvania DOS Obligations
Unlike the New Jersey Bill, the Pennsylvania Bill gives the DOS significant rule-writing responsibilities with respect to ensuring that remote e-notarizations are performed, memorialized and retained in a manner that protects the parties involved and the public generally. These rule-writing responsibilities include:
prescribing the means of performing a notarial act involving communication technology to communicate with a remotely located individual
establishing standards for communication technology and identity proofing, including the use of credential analysis, dynamic knowledge-based authentication, biometrics and other means of identification
establishing requirements or procedures to approve providers of communication technology and the process of identity proofing
establishing standards and periods for the retention of the required audio-visual recording of remote e-notarizations
In exercising its rule-writing authority under the Pennsylvania Bill, the DOS is required to consider 1) the most recent remote e-notarization standards developed by national standard-setting organizations, including the NASS, 2) the remote e-notarization standards, practices and customs of other jurisdictions, and 3) the views of governmental officials and entities, and other interested persons.
The Pennsylvania Bill contains no provisions for the assessment of penalties for violations. However, the state law that the Pennsylvania Bill amends gives the DOS authority to impose administrative penalties of up to $1,000 on a notary public for each violation of its provisions, which, upon enactment of the Pennsylvania Bill, would include violations of the remote e-notarization rules.
The Pennsylvania Bill states that most of its provisions will take effect Jan. 1, 2020 (a date that may likely move further in the future in any new bill). However, the definitional section of the Pennsylvania Bill, as well as the sections 1) authorizing notaries to certify tangible copies of electronic records to be true and correct copies thereof, and recorders of deeds to accept such certified copies containing a notarial certificate as satisfying any requirements that the record be original, and 2) requiring the DOS to adopt regulations, are stated to take effective immediately.
It is important for all who may be impacted by the legalization of remote e-notarizations to closely monitor legislative developments in this area. Any such legislation that places too many roadblocks before notaries who wish to perform notarial acts with respect to remotely located individuals could significantly lessen its intended beneficial impact upon the public at large. Conversely, legislation that includes inadequate protections against the potential use of remote e-notarizations to commit fraud could result in substantial harm to the public, as well as to those persons and businesses that rely upon notaries to ensure that individuals signing documents or taking oaths are in fact who they purport to be. Any legislation that is under consideration must be carefully tailored to achieve a desirable balance between these two competing concerns.
Holland & Knight Partner Leonard A. Bernstein contributed to this client alert.
1 As of Jan. 9, 2019, it appears that 10 states – Indiana, Michigan, Minnesota, Montana, Ohio, Nevada, Tennessee, Texas, Vermont and Virginia – have laws that permit remote e-notarizations. See National Notary Association Bulletin: "Remote Notarization: What You Need To Know," by Michael Lewis (June 27, 2018, updated Jan. 9, 2019)
2 New Jersey's UETA law is codified as N.J.S.A. 12A:12-1 et seq. (P.L. 2001, c. 116) and Pennsylvania's as 73 P.S. 2260.101 et seq. (Act of Dec. 16, 1999, P.L. 971, No. 69). Note also that the three states that have not enacted UETA – Illinois, New York and Washington – have enacted laws recognizing electronic signatures.
3 N.J.S.A. 12A:12-11; 73 P.S. 2260.307.
4 Experts Debate Pros And Cons Of Webcam Notarization," National Notary Association Bulletin (Aug. 10, 2016)