Executive Orders: Virtual Notary
Journey to Law
Signed by Governor Asa Hutchinson on March 30, 2020, EO-20-12 suspended the requirement for in-person witness and notary actions of legal documents. Early during the Arkansas 93rd General Assembly, bills were filed seeking to codify EO-20-12. However, the journey was not without opposition. Multiple bills were filed and competing interests emerged early on. The final result was not an act that mirrored EO-20-12, but a bill that provided additional safeguards against the “willy-nilly” practice allowed during the pandemic.
The passage of remote notary legislation was a trend across the county. According to the National Notary Association, Arkansas was the 35th state to authorize permanent remote online notarization following the pandemic.
Executive Order 20-12
According to EO-20-12, the requirement of in-person witnessing prevented the most vulnerable populations from receiving necessary legal services during the pandemic. Therefore, the order allowed video conference or electronic signature technology to be utilized. With improvements in technology, the order said, the risks of remote witnessing have diminished.
The order was not without qualification. It required that those participating in the signing be physically located in the State of Arkansas at the time of signing and included limitations on notaries authorized under the order. Authorized notaries included:
- An attorney licensed by the State of Arkansas,
- A title agent licensed by the State of Arkansas,
- A person supervised by either an attorney or a title agent licensed by the State of Arkansas, and
- A person employed by a financial institution registered with the Arkansas State Bank Department.
Multiple Bills Filed
During the 2021 regular session, at least four bills were filed in an attempt to codify, or address, the virtual notary allowed under EO-20-12. Two died in committee, one died in the House, and one became law.
SB14
Filed on December 16, 2020 by Senator Dan Sullivan, SB14 did not make any headway. The bill was referred to the Senate Committee on Public Health in January but was never presented. Ultimately, Sen. Sullivan withdrew the bill on April 5.
HB1367
Filed on February 1, 2021 by Rep. Penzo, HB1367 passed through the House Committee on State Agencies and Governmental Affairs but failed before the full House in mid-April by a vote of 18 Yeas and 50 Nays with 14 Non-Voting and 18 Present.
SB340
Filed on February 22, 2021 by Senator Bob Ballinger , SB340 was the only bill of the four to be signed into law. Passing easily through the House and Senate, SB340 became Act 1047 and took effect on April 29, 2021.
HB1952
Filed near the end of session on April 20, 2021 by Representative Clint Penzo, HB1952 was never presented and died in the House Committee on State Agencies and Governmental Affairs.
The Penzo Method vs. The Ballinger Method
Rep. Penzo filed two bills to address the in-person witness requirement during the 2021 session. Rep. Penzo presented HB1367 to the House Committee on State Agencies and Governmental Affairs on the morning of April 14, 2021. Rep. Penzo began his presentation by recounting the reasoning behind the Governor’s Executive Order. Rep. Penzo then turned the mic over to Sen. Ballinger, the bill’s co-sponsor, to discuss the bill. Sen. Ballinger carried the remainder of the presentation and answered questions related to the bill as his bill, SB340, was a focus of conversation throughout.
According to Sen. Ballinger, two different types of people were pushing for the codification of the order: those who wanted a simple process for virtual notary, such as a small business lawyer, and those who needed a more complex and secure process, such as mortgage brokers. HB1367 addressed the former, codifying EO-20-12, and SB340 was designed to address the latter and expand safeguards. Sen. Ballinger explained that the complex process required under SB340 may not be worthwhile for certain businesses, and HB1367 would allow those businesses to continue under the same processes allowed under the executive order.
After this mixed presentation, there were a number of questions from the committee, particularly with how these bills would work together. Representative David Whitaker, coining these two bills the “Ballinger method” (SB340) and “Penzo method” (HB1367) of remote notarization, expressed concern voiced by mortgage bankers. Sen. Ballinger explained that those concerned with the “Penzo method” could simply put requirements in the closing documents to ensure compliance. This, according to Sen. Ballinger, would allow mortgage bankers adequate protection while still allowing trust attorneys to use the “Penzo method” that works best for their business.
Representative Jeff Wardlaw called attention to the lack of consistency between the two bills and voiced concern over the “willy-nilly” nature of HB1367. Sen. Ballinger reemphasized that the bills satisfied both parties seeking codification of the executive order, by allowing flexibility for attorneys under the “Penzo method” and safeguards for the mortgage industry under the “Ballinger method.” He also added the “willy-nilly” nature of HB1367 mirrored EO-20-12.
Upon Rep. Wardlaw’s request, the committee heard from Kurt Naumann, a legislative liaison from the Arkansas Secretary of State’s Office. Naumann was unable to answer questions on HB1367 as the SOS office had not been involved in its drafting; instead, his answers focused on the contents of SB340, including its requirement to maintain video files and other security measures.
Against the Penzo Method
Two individuals spoke against the bill: Greg Ramer, on behalf of the Arkansas Mortgage Bankers Association, and Wesley Lasseigne, on behalf of the Arkansas Land and Title Association.
Ramer stated HB1367 did not have fraud protections that are essential to ensure consumer personal information and data. The protocols instituted during the pandemic, according to Ramer, were appropriate during the emergency but were never intended to be permanent.
Lasseigne applauded Ramer’s remarks and addressed concerns raised by members of the committee, focusing on issues that would occur if both HB1367 and SB340 were passed. Aside from the lack of security features, Lasseigne pointed out that HB1367 did not require the document itself to contain an acknowledgment that the notarization occurred through audio-visual means. Accordingly, once signed and placed in record, there would be no way to know how the document was witnessed and acknowledged. He expressed additional concerns for liability this bill might cause for title insurers.
Billy Roehrenbeck with Pulaski County Title was also signed up to speak against the bill but yielded his time to Lasseigne .
The End of the Penzo Method
In his closing remarks before the House State Agencies committee, Rep. Penzo indicated his bill was designed for trust attorneys to be able to continue to utilize the benefits of the executive order after the emergency ends. After filing, he was inundated with parties wanting to make modifications to the bill. Rep. Penzo worked with Sen. Ballinger in an attempt to combine the two bills, but the result was over-complex and cumbersome. Accordingly, they split the bills. Rep. Penzo said there was still a need for this type of virtual notary to allow elderly and other vulnerable populations to complete important legal documents.
The bill passed with audible dissenters. Later that week, on April 19, the bill failed in the House.
Ballinger Method Prevails
SB340 passed through the Senate Committee on State Agencies and Governmental Affairs and the Senate with little fanfare. Senator Stephanie Flowers was the only Senator to vote against the bill on the Senate floor on April 14.
After passing through the Senate, the bill was amended. Sen. Ballinger presented an amendment to SB340 to the House Committee on State Agencies and Governmental Affairs on April 26. He explained an amendment was added to acknowledge that everything notarized through the executive order was statutorily permitted and was not subject to dispute. Essentially, it was added to allow those attorneys who supported HB1367 to be assured their practices during the emergency were legitimized. The amendment was adopted, and the bill passed through committee without discussion. On the same day, the bill passed through the House.
The following day, April 27, SB340 went back to the Senate floor. Again, the only Senator opposed was Sen. Flowers.
On April 29, SB340 became Act 1047 and went into effect via the emergency clause.
Act 1047 Safeguards
As highlighted in committee discussions, SB340 contained a variety of safeguards not found in the original executive order. Some of those safeguards include:
- Clarifies that notaries who want to perform online notarial acts must register with the Secretary of State by meeting the same requirements for registration as an Electronic Notary Public;
- Requires an electronic notarial certificate for an online notarial act to include a notation that the notarization is an online notarization;
- Requires an online notary to take reasonable steps to ensure the integrity, security, and authenticity of online notarial acts;
- Requires an online notary to create an audio-visual recording of the performance of the online notarial act or designates an individual to do this on behalf of the online notary;
- Requires an online notary to keep a secure electronic record of electronic documents notarized; and
- Requires the electronic record to be maintained for at least 5 years after the date of the transaction or proceeding.