Equipment leasing has changed overnight. Till now, many industry players have taken a wait-and-see approach to adopting electronic processes.
But in the aftermath of Covid-19, companies that want to compete in equipment leasing and finance will need digital transformation.
That was the takeaway of an insights-filled webinar, “eSigning and eLeasing in the Covid-19 World: Taking It to the Next Level,” hosted by the Equipment Leasing and Financing Association (ELFA). The event brought together three digital financing experts – Stephen Bisbee, president and CEO of eOriginal; Robert Cohen, partner at Moritt Hock & Hamroff; and Dominic Liberatore, deputy general counsel for DLL – to explore the pandemic’s impact on equipment leasing.
The panelists agreed that the future is digital. But to realize return on investment in digitalization, industry participants need to understand:
- Why the marketplace demands electronic processes
- Why eSigning is crucial, and how and eSignature differs from an eRecord
- What to look for in an eLeasing solutions provider
Why Electronic, and Why Now?
Equipment leasing has long been moving toward digitized processes. In fact, the legal underpinnings began to emerge decades ago. The Uniform Commercial Code (UCC) 9-105, Uniform Electronic Transactions Act (UETA) and Electronic Signatures in Global and National Commerce (ESIGN) Act established criteria for secured transactions and ensured the validity of electronic contracting.
Yet prior to 2020, many organizations saw electronic processes as nice-to-haves, driven by the promise of better borrower experiences, greater capital efficiencies and lower costs.
Now, following the Covid-19 crisis, digitalization has become an imperative. Instead of companies trying to convince customers that digital is more convenient, customers are demanding that companies deliver electronic processes. Remote, contactless finance applications and closings are the new normal, and remote back-office operations are becoming viable.
Such digitalization has been embraced across sectors. In mortgage lending, developments such as remote online notarization (RON) have enabled contactless close. For small-business loans, the U.S. Small Business Administration made lending remote and fast. In auto financing, contactless test drives, closings and delivery are becoming commonplace.
The result? Equipment leasing players can no longer avoid electronic processes. To compete and win, they need to embrace digitalization.
eSignatures and eRecords: More Than Just Electronic Files
Digitalization often begins with eSignatures, which is any electronic symbol, sound or process used with the intent to sign an eRecord. The keys to enforceable eSignatures are attribution, intent and authority.
An eRecord, in contrast, is a stored “record” – that is, information retrievable in perceivable form – that’s not on paper but in digital form. The key to an eRecord is a retention system that enforces legal obligations, meets state and federal writing and retention requirements, and is admissible into evidence in the event of a dispute.
Two crucial aspects of eSignatures and eRecords are ensuring an authoritative copy and establishing control. “Control” is to the authoritative copy what “possession” is to a paper security. Federal and state laws require control of the authoritative copy by a system that reliably establishes a party is assigned, issued or transferred the authoritative copy.
The safe harbor for this control test requires that the authoritative copy is created, stored and assigned to meet six stringent criteria:
- Authoritative copy – There’s a single, authoritative copy that’s unique, identifiable and unalterable.
- Assignee identification – The authoritative copy identifies the secured party as the assignee of the record or the person to which it was last transferred.
- Communication and maintenance – The authoritative copy is communicated to and maintained by the person asserting control or the designated custodian.
- Secured party modification – Revisions that change an assignee must be made with participation of the person asserting control.
- Copy identification – Any copy is identifiable as not the authoritative copy.
- Copy revisions – Any amendment is identifiable as either authorized or unauthorized.
The Value of a Trusted Partner
Whether you’re beginning with eSigning or embracing full-blown eLeasing, you need an effective solution from a vendor you can trust.
Your eLeasing solution should be purpose-built to create and maintain a first-priority lien throughout the financing lifecycle. It should be robust enough to address the needs of all participants, including borrowers, originators, warehouse lenders, settlement agents, custodians and investors. And it should cover the four phases of the end-to-end financing process:
- Application – Includes document prep, application, approval and origination
- Closing – Covers eSigning, RON and the eNote, or authoritative copy
- Management – Provides eVault certainty, collateral protection, asset custody and eRegistry
- Monetization – Addresses securitizations, sales and transferring, and digital assets and tokens
As for your eLeasing provider, it should offer expertise, experience, trust and scale. For example, the eOriginal Digital Lending Platform supports more than 600 clients, 14 million yearly transactions, 280 digitized securitizations valued at $117 billion, and nearly 340 credit ratings.
The Covid-19 crisis will eventually be behind us. But the webinar panelists agreed that electronic equipment leasing processes are here to stay. Industry participants that embrace digitalization now will better meet customer demands today and will gain a competitive advantage going forward.