All About Signature Stamps
A signature stamp is simply a stamped image of your signature. They are most often used by businesses and governmental organizations to get through a large volume of paperwork with the same signature. But they have many uses for individuals, as well, and are welcomed by some private companies.
Most people are familiar with signature stamps, but some do not use them because they do not understand their legality. We will look at the legality of signature stamps in more detail later.
Many companies employ signature stamps in their day-to-day operations . Common uses include:
Individual employees of government agencies enjoy the ability to sign using a signature stamp for some documents, which saves them time and effort.
For example, clerks for probate courts often have to perform large volumes of work, and affixing their signatures to all those documents can take up a lot of their time. In those courts that allow it, clerks can simply stamp their signatures on the orders and judgments they issue. Then they can spend the time saved doing things that really required their personal attention.
We will look at other examples of individual application of signature stamps, but first let’s look at one of the most common uses for individuals: estate planning.
Legality of Signature Stamps
The legal status of signature stamps varies from jurisdiction to jurisdiction, ranging from total prohibition to full acceptance with specific rules. As a general rule, signature stamps are legal, although not always accepted by institutions where "wet" signatures are the norm. They are used extensively worldwide in public offices, including banks and insurance companies.
In some parts of Europe, such as Germany and Austria, signature stamps are strictly forbidden, even in the public sector. In Japan, the use of paralegal seals on court documents and contracts is a long-established practice. Even without full legalization, however, signature stamps continue to be used in many countries. Last year, for instance, the Japanese Ministry of Justice distributed 1 billion "name" stamps, accounting for around $10 million worth of stamps. Overall, China’s market for seals is estimated at more than $200 million annually, with around 600 million stamps in use.
In the United States, the situation is complicated. Some regulations (such as the Department of Defense Manual 5000.01) allow the use of signature stamps, but many agencies have their own rules. The Department of Energy (DOE), for example, allows signature stamps when the use of a wet signature is impractical. Signature stamps are also expressly permitted in the context of a service center for the U.S. Government Printing Office (GPO). Public authorities are generally willing to provide a waiver on the requirement for a wet signature, if there’s a compelling reason to do so. This is why signature stamps are so useful in processing voluminous paperwork quickly.
At the state level, signature stamps are permitted in most cases. In California, the Department of Justice provides guidance in this regard for applying for a Certificate of Exemption. The process is straightforward and inexpensive. In Virginia, a regulation codified at 19VAC30-20-190 authorizes the use of stamp or facsimile signature for purposes of obtaining a copy of a driving record for business use. There are several bona fide uses of a signature stamp in legal proceedings, among them signing pleadings, discovery responses, briefs, contracts, and even checks. With the proper record keeping, these uses are generally above board.
Signature Stamp Legality: Federal and State Law
Federal regulations do not address the use of signature stamps. For example, there are no federal laws or regulations on whether it is acceptable for a company accountant to sign documents with a stamp. Additionally, state regulations, such as those reviewed by the National Association of Securities Dealers, do not prohibit the use of signature stamps.
In some instances, state statutes and amended statutes prohibit the use of stamps. For example, Iowa business records must be signed by an "officer of the corporation" or a "duly authorized representative." However, "signature by affixing a signature stamp of any such officer or representative shall constitute signature by the signer." Iowa Code Sec. 490.1321.
Other examples are listed in our earlier blog, "Signature Stamps: Are They Legal?" A few states are less flexible: for example, under New York law, a signature stamped onto the application, certificate, report, or document from an architect, professional engineer, or land surveyor must also be accompanied by the stamp-holder’s signature in his/her own handwriting.
Advantages and Risks of Signature Stamps
There are pros and cons to using signature stamps. Stamp usage can speed up transactions requiring signatures, especially for entities with a high volume of agreements and a large number of signatories. For instance, it is very common for nonprofit organizations to have signature stamps with the signature of the president or board chair, allowing staff to obtain the required signature in a timely manner for items such as filings with the Secretary of State or tax returns. Signature stamps are also commonly used to facilitate transactions such as real estate and other contracts. Banking practices have relaxed signature requirements to account for the increased use of signature stamps by customers. Even with the advantages, there are many cautions as described below.
Signature stamps can be misused, providing greater opportunity for fraud than manual signatures. Underdogs often import signature stamps for payment of debts from the opposing side, and extortion and confidence scams using forged signatures are prevalent. For these reasons, many entities require that stamp users complete a registration form detailing the identity and authorized use. However, there is really no way to ensure that a stamp holder does not make additional copies, and the likelihood of this increases when the entity issuing the stamp allows third parties to use the stamp to facilitate the transactions they are involved in, or when the stamp is in the possession of a non-employee. Even if an entity requires the destruction of signature stamps upon termination of employment, customers can buy the stamp online and it rarely occurs to employers to ask for the stamp when an employee leaves, providing another opportunity for fraud by former employees or others. Financial institutions are subject to regulation of the accuracy of signatures on documents, but regulation does not eliminate the potential for fraud by underdogs. Importantly, the regulation of signature verification requirements (including signature stamps) differs from state to state. In some states, such as California, signature stamps are completely banned.
Using Signature Stamps Lawfully
To avert the many issues that can stem from having a signature stamp, businesses using them should create proper policies, practices and procedures to address their use internally. In addition, companies should address their use through vendor management protocols as well as supervisory controls to monitor the proper use of signature stamps.
To avoid detecting issues on the back end, vendors should be required to document all policies, procedures, and controls related to signature stamps and provide the documentation to their valued clients. Vendors can also require clients to agree to and adhere to specific controls, including the following:
- Establish clear policies and procedures before implementing a signature stamp.
- Use lockable cabinets to store stamp public key infrastructure ("PKI") certificates or other items linked to user identity.
- Design and implement a strong PKI-based certificate system.
- Identify at-risk incomplete transactions that require signature stamps and safeguard the transactions.
5 . Incorporate signature stamps into existing security controls, and restrict access to appropriate users in accordance with policies.
- Implement the principle of least privilege throughout the business and make sure that role separation is enforced.
- Make PKI certificates accessible only to personnel with the critical need to access PKI credentials.
- Establish data retention requirements and delete PKI keys, PKI certificates, and signature stamps when there is no longer a need of such items.
- Include specifics regarding the use of signature stamps in third party contracts and service level agreements.
- Regularly audit the use of companies’ signature stamps and certificates.
By using these best practices to keep tight controls on the digital tools and capabilities that are used to create the "signature," businesses can help prevent their employees, contractors or vendors from improperly issuing or replacing paper documents or otherwise undermining the business’s intended messaging. As with any security tool, the signature stamp is useful if used and managed correctly.
Case Law and Signature Stamps
Legal cases concerning signature stamps have generally focused on their application in contractual disputes or in the establishment of a person’s identity. Given that the primary function of signature stamps resembles an individual’s handwritten signature, their legitimacy in contracts and transactions has been tested. In the case of In re Plaut, Hermann v. Comm’r of Soc. Sec., 794 F. App’x 30 (2d Cir. 2019), the United States Second Circuit considered the validity of a signature stamp in a dispute relating to Social Security benefits. Claimant-plaintiff Annette Hermann had established that her husband had previously conveyed his house to her with his signature. The Commissioner and Administrative Law Judge (ALJ) had not considered whether the husband’s signature was a signature stamp, and thus the Second Circuit reversed the judgment and remanded the case for further proceedings. Another example involves Charles H. Burch, who forged 56 checks with a signature stamp of the payee, who was later absolved from criminal responsibility in The State of Tennessee v. Charles H. Burch, Circuit Court for the 11th Judicial District, Hamilton County, Tennessee, No. 29587 (2015). These cases confirm that signature stamps can be legally challenged but also establish that their application will be considered in light of their use in that particular case. Generally, however, courts have held that signature stamps are valid and acceptable. In Campbell v. Detroit Public Schools, No. 283915, 2009 WL 1158807 (Mich. Ct. App. Apr. 28, 2009), the Michigan Court of Appeals enforced a contract signed with a signature stamp. The defendant-appellee, Detroit Public Schools, entered into a contract with Insulate Michigan, Inc. for insulation installation. The contract was signed with the defendant’s stamp. Insulate Michigan then entered into a subcontract with plaintiff-appellant. When Insulate Michigan failed to make payments to plaintiff, it brought a lawsuit against the defendant and alleged breach of contract. The defendant moved for summary disposition, arguing that the contract was invalid because the contract had been signed with a stamp. On appeal, the Court of Appeals considered the implications of the case in light of both Michigan state law, which had similar provisions as to the applicability and legal use of signature stamps as Indiana-based law, and contract law generally. The court noted that Mich. Comp. Laws § 566.106 does not contemplate only "personal signatures" and held that a contract entered into with a signature stamp did not violate Mich. Comp. Laws § 566.106.
On Conclusion: Legality of Signature Stamps
While signature stamps are generally legal to use, it is crucial that you understand the local laws and considerations before utilizing one as your primary signature tool. A good first step in this process is to consult an attorney licensed in your area who can provide guidance on your specific jurisdiction and any other considerations .
You will also want to remain aware of any changes in the legality of signature stamps, being sure to review both state and federal law as well as any relevant recent court decisions.