FTC Set to Appeal the Red Flags Rule Exemption for Attorneys and Law Firms
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On February 25, 2010, the Federal Trade Commission filed a notice that it is appealing the D.C. District Court’s December 28, 2009 judgment in favor of the American Bar Association in American Bar Association v. FTC.  The District Court’s summary judgment held that the FTC’s Identity Theft Red Flags Rule (“Red Flags Rule” or the “Rule”) does not apply to attorneys or law firms.  The Rule implements Sections 114 and 315 of the Fair and Accurate Credit Transactions Act.  In relevant part, the Rule requires creditors and financial institutions that offer or maintain certain accounts to implement an identity theft prevention program.  The program must be designed to detect, prevent and mitigate the risk of identity theft.  Prior to the district court’s decision, the FTC had taken the position in publications and numerous panels that attorneys and law firms meet the Rule’s definition of “creditor” because they allow clients to pay for legal services after the services are rendered.

To read more about the Red Flags Rule, please see our previous blog posts.

View the FTC’s notice of appeal.


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