Does an Electronic Signature Make My Credit Application a Legal Contract?


Empower your entire organization to do their best credit decisions

Traditionally credit applications were completed -- and signed -- on paper, but today almost all credit applications are completed and managed on secure digital systems like ours here at Nectarine Credit.

Many companies ask us whether electronic signatures on credit applications constitute a legally binding contract between the company extending the credit and the customer looking for credit terms.

The short answer is yes, electronic signatures on digital credit applications are legally binding.

So let’s explain this in more detail, first by giving some historical perspective.

ESIGN Act of 2000

In 2000, U.S. Congress passed the Electronic Signatures in Global and National Commerce Act, known as ESIGN.

The law states that a contract or signature “may not be denied legal effect, validity, or enforceability solely because it is in electronic form.” This means that electronic signatures are equivalent to paper signatures, and are subject to the same legal scrutiny of authenticity that applies to paper documents.

Some stipulations apply to electronic signatures. For example, businesses must retain an unaltered electronic record of the signature, it must be accessible to those who are entitled to access it, and it must be in a form that can accurately be reproduced, through printing, for example. Electronic signatures must also be retained for the legally required time period.

Uniform Electronic Transactions Act

In the U.S., the definition of what actually constitutes an electronic signature is defined by the Uniform Electronic Transactions Act, known as UETA. Other countries have passed their own laws to facilitate commerce via electronic signatures. 

So, here at Nectarine Credit, the electronic signatures on our credit applications are legally binding for businesses in almost every country in the world. We follow and are compliant under the laws set out by the U.S. ESIGN Act, UETA, eIDAS in Europe, and the Canadian Uniform Electronic Commerce Act, or UECA, as well as the laws of Australia, New Zealand and South Africa -- to name a few. The electronic signature aspect of our credit applications are ISO 27001 certified, the highest level of global information security assurance.

We also follow best practices of the National Association of Credit Management, the U.S.’s leading advocate for business credit and financial management professionals nationwide.

“A signed credit application document is a first defense in any dispute or potential litigation,” according to NACM. “Therefore, it is essential that the credit application be signed by the customer or the customer’s representative.”

A signature -- electronic or otherwise -- by a customer “is the best evidence that the contract has been accepted,” NACM says.

Advantages of Electronic Signatures

In fact, NACM and other organizations say there are some distinct advantages in using electronic signatures and digital applications over paper:

  • Electronic credit applications expedite the approval and denial process
  • Quick communication regarding incomplete or improper credit applications
  • Completed applications are stored safely and securely for future use
  • Enhanced security with verification and confirmation emails
  • Signature database storage that is easily storable, searchable and accessible

Simply put, electronic signatures are becoming more enforceable than paper signatures because of their audit trail and security features. In the case of credit applications, your signature is in a more secure environment when using digital systems like Nectarine Credit because of the stringent standards we enforce.