July 30, 2009 – The Federal Trade Commission has announced a 90-day delay in enforcing the “Red Flags Rule.”

American Bar Association President H. Thomas Wells, Jr. welcomed the news, noting that the ABA “is very pleased that the FTC has responded to the deep concerns expressed by Congress, the American Bar Association and more than two dozen state and local bar associations, and commends them for taking action before the scheduled Aug. 1 enforcement deadline.”

President Wells stressed that this is only a “temporary reprieve” and that the FTC continues to assert that it has the legal authority to regulate lawyers under the 2003 Fair and Accurate Credit Transactions Act (FACTA), which requires creditors (defined as those who provide services for deferred payment) to create and maintain policies guarding the personal information of their clientele. He said in a statement released yesterday that this view is unacceptable to the ABA because it “undercuts an unbroken history of strong regulation by state bars and supreme courts. It threatens the independence of the profession from federal controls, independence that is fundamental to the lawyer’s role as client confidante and advocate. And it is goes against Congress’ intent when the law was passed.”

In announcing the three-month enforcement delay, the FTC notes that “although many covered entities have already developed and implemented appropriate, risk-based programs, some – particularly small businesses and entities with a low risk of identity theft – remain uncertain about their obligations. The additional compliance guidance that the Commission will make available shortly is designed to help them. Among other things, Commission staff will create a special link for small and low-risk entities on the Red Flags Rule Web site with materials that provide guidance and direction regarding the Rule.”

The FTC announcement goes on to say that the extension to Nov. 1, 2009, “coupled with this new guidance, should enable businesses to gain a better understanding of the Rule and any obligations that they may have under it. These steps are consistent with the House Appropriations Committee’s recent request that the commission defer enforcement in conjunction with additional efforts to minimize the burdens of the Rule on health care providers and small businesses with a low risk of identity theft problems.”

Wells affirmed that the ABA and its counterparts at the state and local levels will continue to work with Congress to clarify that this rule should not apply to lawyers. If necessary, the ABA has also stated that it remains prepared to take the issue to the courts for a final resolution.

Related articles:

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