March 7, 2011 – A lawsuit initiated by the American Bar Association (ABA) to block the Federal Trade Commission’s (FTC) efforts to extend its “Red Flags Rule” to include attorneys has been declared “moot” by a federal appeals court as a result legislation enacted by Congress last December that exempted most lawyers from the rule’s coverage.

The U.S. Court of Appeals for the D.C. Circuit released its ruling on March 4.

The State Bar of Wisconsin had joined the ABA and other state and local bar associations in a multi-pronged effort to protect attorneys from having to comply with the burdensome record-keeping and information safeguarding requirements specified in the rule.

The ABA filed suit in 2009 after the FTC said lawyers should be considered creditors under the Fair and Accurate Credit Transactions Act of 2003 and were subject to provisions designed to protect consumers from identity theft. The FTC reasoned that lawyers are creditors because they extend credit by billing for legal work after it is done.

The D.C. Circuit of Appeals found that the legislative history of the December 2010 law “confirms Congress’ intention to bar the regulation of lawyers based solely on deferred billing practices.” The decision notes “hypothetical possibilities” raised in supplemental briefs that the FTC may still try to regulate lawyers under the amended law. But such speculation doesn’t give rise to a live dispute, the appeals court said. It remanded the case to the district court with instructions to dismiss it as moot.

Related:

Congress exempts attorneys from “Red Flags Rule” – Dec. 7, 2010

FTC extends “Red Flags Rule” enforcement deadline to Dec. 31 – June 1, 2010

Bill shielding some lawyers from FTC ‘red flag rule’ headed to Senate Oct. 27, 2009

Help needed with efforts to delay “Red Flags Rule” implementation on August 1 – July 28, 2009

State Bar of Wisconsin and ABA continue to push for exclusion from pending FTC identity theft 'Red Flags Rule' – July 8, 2009

FTC delays enforcement of ‘Red Flags Rule’ requiring creditors and financial institutions to identity theft prevention programs – May 1, 2009

Lawyers required to protect personal information under new federal rule – April 1, 2009