Business of Law

ABA Battles FTC in DC Appeals Court: Does Red Flags Rule Apply to Lawyers?


Seeking to call a decisive halt to an attempt by the Federal Trade Commission to regulate the practice of law, the American Bar Association argued today in federal appeals court that a U.S. District Court judge clearly got it right when he ruled from the bench last year that the “Red Flags Rule” doesn’t apply to lawyers.

But “lawyers are no different—though they might think they are—from other service-providers,” countered attorney Michael Bergman, representing the FTC, to the U.S. Court of Appeals for the D.C. Circuit, reports the Blog of Legal Times.

At issue in the case is whether lawyers extend credit to clients and thus qualify as creditors under the Fair and Accurate Credit Transactions Act, which the FTC is seeking to apply to attorneys via the Red Flags Rule. It sets criteria that creditors must meet into order to try to protect consumers from identity theft.

“The mission of every lawyer is to provide aid and counsel to our clients and improve access to the justice system—not to push paperwork that attempts to solve what is, for the legal profession, a non-existent problem and promises to raise legal costs,” says ABA President Stephen N. Zack in a written statement concerning the oral arguments today.

“Congress clearly did not intend for the Red Flags provision to apply to the legal profession. This hearing is an important step in our continuing efforts to protect the profession from all forms of unnecessary and unintended regulation.”

Earlier ABAJournal.com coverage:

FTC Postpones Red Flags Rule After Lawmakers Seek Delay

AMA Takes Page from ABA Playbook, Sues FTC Over Red Flags Rule

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