What’s an “original” leasing document? Answering this seemingly rhetorical question is not as straightforward as it seems, considering the increasing digitization of the equipment finance industry.
“With electronic chattel paper, for example, there is a question about what constitutes the ‘original’ document,” says Paul Bent, head of the legal services practice for The Alta Group consultancy. “In the past it was clear – the ‘wet ink’ document was the original. So we must be ready to interpret various UCC requirements around e-signatures.”
His remarks came following a session of the 2017 ELFA Legal Forum that focused on issues related to digital transformation. There, session speakers Raymond W. Dusch of Cisco Systems, Horace (Hob) W. Jordan, Jr. of Kingsbridge Holdings, and Dominic Liberatore of DLL explored changes that are expected throughout equipment finance as e-signatures, electronic chattel paper, automatic fill-ins, digital forms, and digital filings become widespread.
The changes are likely to affect the entire equipment leasing process, from origination through portfolio management. Later this month, in fact, an ELFA webinar is planned highlighting the legal requirements for electronic leasing solutions.
Other hot topics discussed in public sessions and private conversations at the Legal Forum included new laws affecting the equipment leasing industry, which were covered during a town hall style meeting moderated by Mike Leichtling of Troutman Sanders. Participants included Benjamin Court of Stinson Leonard Street, Barry Marks of Marks & Associates, Lisa M. Moore of PNC Equipment Finance, Frank Peretore of Chiesa Shahinian & Giantomasi, and Howard S. Toland of Mitrani, Rynor, Adamsky & Toland.
New York and Florida are two examples of states that have proposed potentially trendsetting laws that could adversely affect lessors.
The wording of New York State’s proposed new cybersecurity regulations remains excessively strict despite attempts by the ELFA and others to explain why modifications are needed. As of March, the regulations were already having an impact on lessors, vendors, and even asset repossession companies.
Equally concerning are Florida’s proposed trade regulations that seem to blur the distinctions between consumer and commercial lending/leasing by, for example, viewing a small business as a consumer in certain circumstances.
“The industry has taken comfort in not doing consumer deals and therefore not being subject to the same rules,” Bent explains. “That distinction is breaking down and has now extended over to us, in part boosted by Dodd Frank.”
Legal counsel’s role in the industry is also evolving, requiring lawyers to better understand the economics of leasing. To that end, a Legal Forum session on “leasonomics” covered how deals work and the economic impact of drafting and negotiating decisions. The session was chaired by Dustin Lee of Fifth Third Bank and included Bent of The Alta Group and Bruce Masterson of First American Equipment Finance.
“Leasing lawyers once primarily provided documentation advice and advice on negotiating deals. Because of increasing regulatory burdens and other requirements, this has called for much greater involvement by lawyers in the business side of things,” Bent says.
Read more about leasing legal trends in this article.