The president of the American Bar Association said today that the group is preparing to go to court if it cannot persuade the Federal Trade Commission to exempt lawyers from new regulations to protect against identity theft.
H. Thomas Wells Jr. said in an interview that the New York-based firm Proskauer Rose has signed up to represent the ABA pro bono. The trade commission is scheduled to begin enforcing the regulations Aug. 1, and Wells said the bar association would file a lawsuit by the end of next week if necessary to head off enforcement.
“If they stay with the Aug. 1 date and we don’t get some kind of sign, we’ll be filing before Aug. 1,” said Wells, a partner at Maynard Cooper & Gale in Birmingham, Ala.
The bar association has been lobbying for months to have lawyers kept out of the regulations, known as the “Red Flags Rule.” The regulations, which grew out of legislation passed in 2003, require businesses and organizations that act as “creditors” to establish a program for preventing identity theft. According to a Federal Trade Commission guide, the program must identify potential areas of vulnerability within a business and include policies for detecting and responding to red flags.
The Federal Trade Commission, which is charged with protecting consumers, has included lawyers, doctors, and many other professionals in its definition of “creditors” because they bill customers only after providing services. The bar association disagrees with the interpretation.
“We just don’t think this is what Congress was looking at” when it wrote the law, Wells said.
The commission did not return a call today requesting comment on possible litigation. Any lawsuit would likely be in the District of Columbia, where in 2005 judges rejected another attempt by the commission to regulate lawyers. In that case, a panel for the U.S. Court of Appeals for the D.C. Circuit upheld a district court ruling that lawyers did not have to send out privacy notices to clients. Proskauer Rose represented the New York State Bar Association in the case.
FTC officials have already delayed enforcement of the regulations twice, most recently three months ago at the request of the bar association. The bar association is also hoping for intervention from Congress.
The commission and the bar association differ on how much of a burden the regulations would be on businesses. The bar association says it asked two law firms to go ahead and implement the regulations: a five-lawyer firm needed 15 hours and a 300-lawyer firm needed 120 hours. The commission has said the rules would be a relatively low burden for most firms.
UPDATE (4:30 p.m.): The Federal Trade Commission has received a request from a House Appropriations subcommittee for an additional delay, said Betsy Broder, assistant director of the FTC's Division of Planning and Information. The commission will consider the request, Broder said in an interview this afternoon, adding she could not say when it would do so.
Broder said the commission believes — as it has said before — that it cannot exempt any professions without specific authority to do so. “When Congress says to cover creditors, we look to see what that means under the law,” she said.
Implementation, she added, is meant to be relatively simple. “This calls for sort of a common sense approach to dealing with fraud,” she said. “Where an entity is not aware of any fraud, their program is necessarily streamlined.”