The Federal Trade Commission will appeal a ruling from October that stripped the agency of its authority to enforce new anti-fraud rules against lawyers.
The so-called "Red Flags" regulations are designed to prevent identity theft, and the FTC argues that the regulations must apply to all “creditors” in order to comply with federal law. The agency includes lawyers in its definition of “creditors” because lawyers frequently begin working for a client on credit, accepting payment some time later.
But the American Bar Association disputes that interpretation, citing a 2005 decision by the U.S. Court of Appeals for the D.C. Circuit that ended another attempt by the FTC to impose regulations on lawyers. The ABA also says the “Red Flags” rules would be costly for the operation of law firms nationwide.
In October, Judge Reggie Walton of the U.S. District Court for the District of Columbia sided with the ABA, saying the law in question is too vague to infer federal regulation of the legal profession. Steven Krane, a partner in the New York office of Proskauer Rose, is heading up a pro bono team that represents the ABA.
The FTC’s notice of appeal to the D.C. Circuit came in a filing Thursday. John Daly, deputy general counsel for litigation at the FTC, is representing the agency.