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Electronic Signature Requires a Verifiable Process, not a Scan of a Signature

Feb 17, 2022

On January 18, 2022, Governor Phil Murphy signed the Motor Vehicle Transaction Modernization Act (“the Act”) into law. The NJ CAR-sponsored law:
  • allows online sales of motor vehicles by licensed dealers;
  • allows the use of electronic signatures on Powers of Attorney (POA);
  • requires the NJMVC to develop the use of electronic signatures on transaction documents within twenty-four (24) months; and
  • allows the price advertisement of vehicles that are inbound to dealerships.

NJ CAR has fielded questions from dealers regarding what constitutes an electronic signature? The new law defines electronic to mean technology having electrical, digital, magnetic, optical, electromagnetic, or similar capabilities. The law also specifies that electronic signatures used to execute Powers of Attorney must be executed in accordance with minimum security requirements set forth by the National Highway Traffic Safety Administration (NHTSA) for Assurance Level 2 (49 C.F.R. 580.1 et seq).

Under the NHTSA requirement, an electronic process must use a secure authentication system identifying a specific individual with a degree of certainty equivalent to or greater than an Assurance Level 2 as described in the National Institute of Standards and Technology (NIST) in the U.S. Department of Commerce. NIST publishes a Digital Identity Guideline with definitions of three (3) authentication levels.

Authentication Assurance Level 2 (AAL2) is defined as providing high confidence that the claimant controls authenticator(s) bound to the subscriber’s account; requires proof of possession and control of two distinct authentication factors through secure authentication protocol(s); and requires approved cryptographic techniques at AAL2 and above.

What is clear from the above is that simply emailing a POA to a customer and having them sign the document and scan it back to the dealership is NOT what is contemplated as an electronic signature under the new law.

NJ CAR recommends that dealers consult with various document processing companies, like Adobe and DocuSign, to develop and implement POA’s to be used with electronic signatures. Dealers are reminded that a notary is not required for the POA to be submitted to NJMVC.