Legislation & Lobbying

US Senate Votes to Exempt Lawyers from 'Red Flags Rule'


The American Bar Association came one step closer today to halting an attempt by the Federal Trade Commission to regulate the practice of law when the U.S. Senate unanimously voted that the commission’s “red flags rule” doesn’t apply to lawyers.

The legislation at issue, which seeks to curb identity theft among credit and financial regulatory agencies through prevention and detection programs, “makes clear” that lawyers, doctors, dentists, accountants and other heath care and service providers “will no longer be classified as ‘creditors’ for the purposes of the red flags rule just because they do not receive payment in full from their clients at the time they provide their services, when they don’t offer or maintain accounts that pose a reasonably foreseeable risk of identify theft,” Sen. Chris Dodd (D-Conn.) said in a colloquy (PDF) inserted in the record after the vote.

“Forty-eight states and local bars have rallied to ensure lawyers were not included in the red flags rule,” Thomas Susman, director of the Government Affairs Office for the ABA said of the mass lobbying effort that preceded today’s victory. The vote regarding the Red Flag Program Clarification Act of 2010 is “icing on the cake,” according to Susman, as the ABA awaits a ruling from the U.S. Court of Appeals for the District of Columbia Circuit to affirm the district court’s ruling to exempt lawyers from the original legislation, the Fair and Accurate Credit Transactions Act of 2003.

Susman expects that suit to be dismissed after a vote on the new bill by the House of Representatives, where it currently faces no opposition, Susman said.

The Senate vote “was a critical step in ending a bureaucratic effort to solve a nonexistent problem with paper-pushing regulations that would have increased legal costs,” ABA President Stephen Zack said in a statement.

Prior Related Coverage:

ABA Journal: ABA and Other Bar Groups Work to Limit Federal Regulation of Lawyers

ABA Journal: FTC Postpones Red Flags Rule After Lawmakers Seek Delay

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

Updated Dec. 2 to include statement from Zack.

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