Bar Associations

Fed'l Judge Rules From Bench for ABA: 'Red Flags' Doesn't Apply to Lawyers

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Updated: In a surprise ruling from the bench today, a federal judge in Washington, D.C., agreed with the American Bar Association that the Federal Trade Commission exceeded its authority by applying its “red flags rule” to practicing lawyers.

Congress did not intend lawyers to be considered “creditors” under the Fair and Accurate Credit Transactions Act, held U.S. District Judge Reggie Walton of the District of Columbia, granting a partial summary judgment motion by the ABA in the declaratory judgment action. A subsequent written order (PDF) was issued Oct. 30.

Under Walton’s decision, the so-called red flags rule developed by the FTC to impose the statute’s identity-fraud-protection provisions on businesses is inapplicable to lawyers outside the financial sector, reports the Daily Record.

The red flags rule is scheduled to take effect Nov. 1 as far as other businesses are concerned.

“This ruling is an important victory for American lawyers and the clients we serve,” says ABA President Carolyn B. Lamm in a written statement. By voiding the FTC’s overbroad interpretation of the FACTA statute’s reach, she adds, “the court has ensured that lawyers stay focused on the mission of their work: providing aid and counsel to the individuals and organizations that need us.”

The ABA was represented by a Proskauer Rose team led by partner Steven Krane. He says he expects the FTC to appeal, reports the Blog of Legal Times.

Asked for his response by the BLT, the FTC’s general counsel, Willard Tom, replied: “It’s safe to assume the commission is going to consider its options very seriously. We think there is no reason lawyers should be exempt.”

Additional coverage:

ABA Journal: “Taking Aim at Red Flags”

State Bar of Wisconsin: “Ruling bars application of FTC ‘Red Flags Rule’ to legal profession”

Last updated Oct. 30 to add a link to the judge’s opinion.

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