Judge Reggie Walton of the U.S. District Court for the District of Columbia ruled today that the FTC cannot force practicing lawyers to comply with Red Flags Rule.
The FTC’s scheduled enforcement date for the Red Flags Rule is November 1. The American Bar Association challenged the Rule’s applicability to lawyers arguing that it would impose a serious burden on law firms, and sought an injunction and declaratory judgment finding that lawyers were not covered. The FTC replied that lawyers should be covered because billing practices, such as charging clients on a monthly basis rather than upfront, made them “creditors” under the plain language of the Rule.
Judge Walton rejected the FTC’s definition of a creditor stating that under the FTC’s interpretation, a plumber who charges a customer after working on a toilet for two days also would be considered a "creditor."
It is not clear at this point whether the FTC will appeal the decision.
An article about this development is available at: http://legaltimes.typepad.com/blt/2009/10/judge-ftc-cannot-make-lawyers-comply-with-identity-theft-laws.html