Lowering the Red Flags
The Red Flags Rule hit two more hurdles recently.
On Oct. 29, 2009, the U.S. District Court for the District of Columbia granted summary judgment to the American Bar Association (ABA) to set aside an extended enforcement policy of the controversial Red Flags Rule in the Fair and Accurate Credit Transactions Act (FACTA) as it would have pertained to working lawyers. (American Bar Association v. Federal Trade Commission, case number 09-cv-1636)
The Red Flags Rule swept within its coverage all "creditors," which the FTC asserted includes lawyers engaged in the practice of law who bill for their services after those services are rendered. The ABA argued that the FTC was incorrect in its interpretation of FACTA and that application of the Red Flags Rule to attorneys based upon their billing practices was unreasonable. Judge Reggie B. Walton of the U.S. District Court for the District of Columbia granted the ABA's motion for summary judgment to set aside the FTC's enforcement policy as it applies to working lawyers. Accordingly, lawyers will not need to meet the Nov. 1, 2009, enforcement deadline.
Additionally, the FTC announced on Oct. 30 that it would delay enforcement of its Red Flags Rule until June 1, 2010, at the request of members of Congress.