ABA, FTC, "red flag rules" & U.S. Senate bill

The Blog of Legal Times yesterday reported, that "the American Bar Association has been battling for more than a year with the Federal Trade Commission to exempt lawyers, especially, from new regulations designed to fight identity theft. Now, Congress has decided to step in.

"With no fanfare and no recorded vote, late Tuesday, the Senate approved legislation that could accomplish what the ABA was hoping to achieve -- a bill that would narrow the definition of 'creditor' under the Fair and Accurate Credit Transition Act of 2003, likely ensuring that lawyers would not meet the new definition."

"Senate Bill 3987," the post says, "would define a creditor largely as someone who 'uses credit reports, furnishes information to credit reporting agencies or ‘advances funds…based on an obligation of the person to repay the funds or repayable from specific property pledges by or on behalf of the person.'"

In a statement last summer the FTC summarized the last three years: "the rule became effective on January 1, 2008, with full compliance for all covered entities originally required by November 1, 2008. The Commission has issued several Enforcement Policies delaying enforcement of the Rule. Most recently, the Commission announced in October 2009 that at the request of certain Members of Congress, it was delaying enforcement of the Rule until June 1, 2010, to allow Congress time to finalize legislation that would limit the scope of business covered by the Rule. Since then, the Commission has received another request from Members of Congress for another delay in enforcement of the Rule beyond June 1, 2010."

The ABA also then noted that it had won a federal district court ruling last December holding that the Red Flags Rule should not be applied to attorneys, and that physician groups, including the American Medical Association, had likewise sued the FTC on May 21 after it refused to apply the same reasoning to exclude doctors from enforcement. The ABA district court ruling was appealed last February with oral arguments having been held last Nov. 15th. . The AMA case was being "held in abeyance" until the appeals court decides the ABA case. ( See Order )