WASHINGTON – In a surprise ruling Thursday, a federal district court blocked the Federal Trade Commission from enforcing ‘red flags’ identify fraud regulations against lawyers.
Under the rules, created by the Federal Trace Commission and set to be enforced as of Sunday, Nov. 1, businesses that accept deferred payments from clients must create written policies outlining how they will prevent, detect and address identity fraud.
The American Bar Association sued the agency, claiming that it exceeded its authority by imposing the regulations on attorneys outside of the financial sector, and that the regulations would pose an undue burden on attorneys. The FTC contended that under the Fair and Accurate Credit Transactions Act, attorneys who accept deferred payments from clients are creditors.
The group later moved for partial summary judgment, asking the U.S. District Court for the District of Columbia to hold that the regulation is inapplicable to attorneys engaged in the practice of law.
The court held a hearing on the summary judgment motion Thursday and Judge Reggie Walton granted the ABA’s request from the bench, holding that Congress did not intend for lawyers to be considered “creditors” under the Act.
“This ruling is an important victory for American lawyers and the clients we serve,” said ABA President Carolyn B. Lamm. “By voiding the FTC’s interpretation of a statute that was clearly not intended to apply to the legal profession, the court has ensured that lawyers stay focused on the mission of their work: providing aid and counsel to the individuals and organizations that need us.”
The FTC can appeal the ruling.
Kimberly Atkins writes for Lawyers USA, a sister publication of The Daily Record.