The
Federal Trade Commission is on a mission to control identity theft. But
the American Bar Association says that it is overreaching and bringing
new and unwarranted federal regulation down upon lawyers, and it has filed a suit to try to stop the enforcement of new FTC rules.
The FTC has been planning for some time to implement the so-called "Red Flags Rule,"
which will require covered businesses to put in place certain
safeguards against the theft of their customers' identities. The
underlying legislation, and therefore the FTC rules, mandate that
"creditors" be subject to the rules. However,
the ABA has a problem with the FTC's characterization of professional
like doctors and lawyers as "creditors." The FTC says that anyone who
provides a service, and then later gets paid, is by definition a
creditor, and that law firms are therefore subject to the Red Flags
Rule. The suit filed this week seeks declaratory and injunctive relief
declaring that lawyers are not required to comply with the rule.
The ABA also expressed concern
that regulation of attorneys has always been largely a matter under
state control, and that increased federal presence in this area should
be avoided. It does not appear that this contention is part of the
lawsuit, however.