Loan Officer Practice Exam

According to the Electronic Signatures in Global and National Commerce Act, how can a business satisfy record retention requirements?

1. By maintaining paper copies of all records

2. By retaining an electronic record accessible to authorized individuals

3. By keeping records exclusively in digital formats

4. By creating a physical archive of documents

The correct answer is: By retaining an electronic record accessible to authorized individuals

The correct answer emphasizes the importance of retaining an electronic record that is accessible to authorized individuals, as per the Electronic Signatures in Global and National Commerce Act (ESIGN Act). This act acknowledges the legality of electronic records and signatures, provided that the records are retained in a way that ensures their accessibility and integrity. The requirement is that businesses must ensure that the electronic records can be reliably reproduced for future reference, which includes the ability for authorized users to access and retrieve these records when necessary. This aligns with the modern approach to record-keeping, where electronic documentation is more efficient and cost-effective compared to traditional paper-based methods. In contrast, maintaining paper copies can be cumbersome and does not take full advantage of the capabilities of digital record-keeping. While keeping records exclusively in digital formats aligns with the use of technology, it does not specify the accessibility aspect for authorized individuals, which is crucial. A physical archive of documents also fails to utilize the benefits offered by electronic record-keeping outlined in the ESIGN Act. Hence, option B is the most comprehensive and compliant method of satisfying record retention requirements.