The judge who ruled that lawyers can't be forced to comply with new federal rules meant to prevent identity theft released his written opinion today. The 40-page document is pretty much in keeping with U.S. District Judge Reggie Walton's Oct. 29 comments from the bench. But it provides a lengthy explanation of his on-the-spot decision, made just days before the so-called "Red Flags Rule" had been scheduled to go into effect.
In short, Judge Walton of the District of Columbia found that the Federal Trade Commission overreached when it tried to define lawyers as “creditors.” In 2003, Congress passed the Fair and Accurate Credit Transactions Act, which required businesses that regularly extend credit to customers to come up with a written plan for heading off potential identity thefts. Congress left the definition of creditor somewhat open-ended, but Walton was fairly sure legislators didn’t have lawyers in mind when they wrote the law.
"The Court is confident in concluding that the term attorney-client is nuanced enough that if Congress, which is comprised of many members who are themselves attorneys, intended to regulate attorneys and their invoiced billing practices it would have used the appropriate terminology to denote that intent and not hidden it in a statute expressly targeted at the credit industry," Walton wrote.
The FTC had cited previous instances where it believed lawyers were treated as creditors, pointing in particular to a finding by the Federal Reserve Board’s staff. Walton found it wasn’t relevant. He also took special umbrage at the FTC’s suggestion that lawyers weren’t already required to protect against possible identity theft by clients, devoting a lengthy footnote to the issue.
“Attorneys are already obligated to conduct themselves in a manner that promotes the objectives of the Red Flags Rule,” Walton wrote, “and the Commission's position that its regulation is needed to protect third-parties against identity theft is just not the case."