FTC Delays Enforcement That Would Affect Lawyers

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.

Comments

[A.W.]

I think i have said this before, but the crazy thing about the FTC's position is this. First, it doesn't apply to "corporations." it applies to "persons."

Now obviously a corporation is a person, but guess what? So is a, you know, *person,* as in a human being.

Further, according to the FTC if there is any delay at all between the work being provided and the payment for such work, you are covered.

So raise your hand if you, as an individual person, feel that you are not covered. not so fast. when are you paid? and when did you do the work to get paid? i would assume that 99% of all working people reading this would say there is a delay between providing the work and providing the payment. So, pretty much everyone is a creditor, according to the FTC. And that makes them required to watch for identity theft, and to comply with the equal credit opportunity act (which bans discrimination based on sex or marital status, which is another government boondoggle*). That means the lowly floor mopper at Safeway is required to comply with these federal regulations, which should be the first sign to them that they are reading it wrong.

now to be fair some of the blame lies squarely with congress for passing an idiotically written law in the first place (which suggests, gee, maybe they should be reading what they pass). the literal words of the statute could be read this way, but the courts have walked it back, applying a standard of substantial contemporaneousness between the work done and payment. So if you bill monthly, you should be fine. lawyers should be familiar with the precedent that said that and i am too lazy to look it up right now.

so its not that the legal profession is specifically exempt but that everyone who bills monthly is by that case law, and until this idiot administration came in, they accepted that limitation, perhaps realizing how ridiculously broad a literal reading of the statute would be. i would go as far as to say that without that limiting interpretation, this law might be unconstitutional.

*why do i call that a boondoggle? Well, because by requiring banks to ignore the credit of spouses, which is the effect of that law, banks are required to ignore an obvious source of risk. If the wife has perfect credit, but the husband has a history of blowing the family savings in Vegas, isn't that at least relevant to determining how much credit to extend to them? And you have to wonder how much that contributed to the credit crisis we have now.