In a victory for those who fear federal regulation of the legal profession, the Federal Trade Commission said today it is delaying enforcement of new rules designed to prevent identity theft.
The American Bar Association has been lobbying for months to have lawyers exempted from the rules, which it says would be burdensome to law firms and set a precedent for federal agencies to place other requirements on lawyers. Last week, outgoing ABA President H. Thomas Wells Jr. said the bar association was preparing a lawsuit to prevent enforcement, which was scheduled to begin Aug. 1.
FTC officials announced in a statement that they would not begin enforcement of what they call the “Red Flag Rule” until Nov. 1. In the meantime, the statement said, the agency plans to add more information to its Web site. The agency is also emphasizing that it is unlikely to bring enforcement actions “if entities know their customers or clients individually, or if they perform services in or around their customers’ homes, or if they operate in sectors where identity theft is rare and they have not themselves been the target of identity theft.”
This is the third time the FTC has delayed enforcement of the new identity-theft rules, which under a 2003 law require businesses that act as “creditors” to set up a program to minimize risk. Lawyers, doctors, and other professionals have protested the FTC’s broad interpretation of “creditors” to include businesses that bill clients some time after providing services.
In a statement, Wells called the three-month delay a “temporary reprieve” for lawyers.
“However, the FTC’s continued assertion that it can, as it sees fit, regulate lawyers under the ‘red flags’ provisions is troubling, and unacceptable to the ABA,” Wells said. “It undercuts an unbroken history of strong regulation by state bars and supreme courts. It threatens the independence of the profession from federal controls, independence that is fundamental to the lawyer’s role as client confidante and advocate. And it is goes against Congress’ intent when the law was passed.”
The ABA will keep lobbying Congress to exempt lawyers from the rule permanently, and it could still file suit if necessary, Wells said.