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ABA Sues FTC over Red Flags Rule

Posted in General Business News

Corporate clients still need to comply with the FTC’s Red Flags Rule by November 1, 2009, but it’s their lawyers who are really unhappy about the regulations.  Last week the American Bar Association sued the FTC to stop the FTC’s enforcement of the Red Flags Rule against attorneys. The FTC says the law applies to creditors, which includes lawyers who extend credit by billing for services previously rendered. The ABA counters with some compelling arguments:

  1. There’s no rational connection between the practice of law and identity theft;
  2. Traditionally, states regulate lawyers, not the FTC;
  3. Compliance with the Rule will increase legal costs and impede the attorney-client relationship; and
  4. Lawyers should not be considered “creditors” simply because ethics rules generally prohibit receiving payment in advance.

Despite the ABA’s legal fight, it should be relatively easy for most lawyers to develop written policies to ensure their clients are not using identity theft to procure legal advice.  A court may soon decide if lawyers will need to implement their own red flags policies.