Court says FTC's "Red Flags Rule" does not apply to lawyers

Issue December 2009

The District Court for the District of Columbia ruled recently that the Federal Trade Commission's so-called "Red Flags Rule" cannot be applied to lawyers. The Massachusetts Bar Association was actively opposed to the application of the Red Flags Rule to attorneys and voiced its concerns to the FTC.

The MBA, working with the American Bar Association, also communicated its concerns to members of Congress. Ultimately, the ABA filed suit in August following months of work seeking clarification of the rule and its application to lawyers. On Oct. 30, Judge Reggie Walton ruled from the bench.

The Red Flags Rule was promulgated by the FTC under the Fair and Accurate Credit Transaction Act (FACTA Act) of 2003. The Red Flags Rule requires certain creditors to develop and implement programs to identify, detect and respond to warning signs of identity theft. The FTC had indicated plans to apply the rule to lawyers, despite the fact that they are not creditors.

Also on Oct. 30, the FTC extended the enforcement deadline to June 1, 2010.