What is SIMILARLY AUTHENTICATED ?
SIMILARLY AUTHENTICATED – An authentication standard that allows written and signed authorizations to be obtained in electronic form. To meet the requirement of “in writing,” an electronic authorization must be view-able on a computer screen or other display method that will allow the consumer to be able to ready the authorization.
1. Regulation E Requirements
Regulation E includes an authentication requirement for preauthorized electronic funds
transfers. The relevant section at 12 CFR 205.10 states:
Preauthorized electronic fund transfers from a consumer’s account may be authorized
only by a writing signed or similarly authenticated by the consumer. The person that
obtains the authorization shall provide a copy to the consumer.
Regulation E thus allows two forms of authorization. A consumer authorization may be either:
1. Signed; or
2. Similarly Authenticated.
The first option, obtaining a physical signature, is logistically more difficult and may delay
processing the transaction as agreed. Thus, an electronic or “similarly authenticated”
authorization is often desirable. When taking that approach, the payee is responsible for
ensuring that the authorization has been “similarly authenticated.”
To simplify compliance, the Federal Reserve Board’s Official Staff comments on Regulation E
define a “safe harbor” for meeting this “similarly authenticated” requirement. Basically, the
Federal Reserve considers any electronic authorization that meets the requirements of the
federal Electronic Signatures in Global and National Commerce Act (15 U.S.C. 7001 et seq.) (the
“E-Sign Act”) to be “similarly authenticated.”
The published Federal Reserve comments state:
The similarly authenticated standard permits signed, written authorizations to be provided
electronically. The writing and signature requirements of this section are satisfied by
complying with the Electronic Signatures in Global and National Commerce Act, 15 U.S.C.
7001 et seq., which defines electronic records and electronic signatures. Examples of electronic
signatures include, but are not limited to, digital signatures and security codes. A security code
need not originate with the account-holding institution. The authorization process should
evidence the consumer’s identity and assent to the authorization. The person that obtains the
authorization must provide a copy of the terms of the authorization to the consumer either
electronically or in paper form. Only the consumer may authorize the transfer and not, for
example, a third-party merchant on behalf of the consumer.2
Operating in accordance with the Federal Reserve staff comments provides protection from
liability under Sections 915 and 916 of the EFTA for financial institutions and persons subject
to these laws.