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Bar objects to including lawyers under FTC’s new Red Flags Rule

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Bar objects to including lawyers under FTC’s new Red Flags Rule

Bar President Jesse Diner has sent a letter to the Federal Trade Commission relating The Florida Bar’s opposition to including lawyers under the FTC’s proposed “Red Flags Rule” on protecting consumers from identity theft.

Diner’s letter follows approval by the Bar Board of Governors of an ABA position opposing the FTC’s position that lawyers are covered by the Fair and Accurate Credit Transaction Act (FACTA), passed in 2003. The board acted at its July 17 meeting in Naples.

The FTC’s Red Flags Rule requires creditors to adopt policies to identify risks and protect customers from possible identity theft. Its preliminary rules were drafted to include lawyers, although the agency agreed to delay implementation until August 1 after the ABA objected. (See story “Lawyers may have to comply with new FTC ‘Red Flags Rules’” in the June 1 News. )

Diner’s letter, sent to FTC Chair Jonathan D. Leibowitz and copied to every member of Florida’s Congressional delegation, said, “Our state bar does not believe that FACTA was intended to include lawyers within its provisions, consequently the FTC need not separately attempt to cover lawyers under its Red Flags Rule. Further, the manner in which attorneys bill their clients — charging a fee only after services are rendered — is not an extension of credit under FACTA. Additionally, any failure to apply the Red Flags Rules to lawyers should not likely increase the risk of identity theft within the legal profession.

“Lawyers are not creditors. And the regulation of the practice of law has traditionally been the province of the states within our federal system. Therefore, Congress and the FTC should take appropriate steps to ensure that the Red Flags Rule will not apply to lawyers who are engaged in the practice of providing legal services to their clients.”

At the Board of Governors meeting, the board unanimously approved the recommendation of the Legislation Committee to endorse the ABA position on the Red Flags Rule.

The ABA argued that FACTA does not mention lawyers and that Congress never intended it to cover the legal profession. The association also noted the bill is intended to apply to those who extend credit to others and the way lawyers bill, by charging for services already rendered, is not an extension of credit.

Nor, the ABA contended, has there been a demonstrable problem as the FTC has not been able to cite a single instance of identity theft arising from a law practice, and hence the regulation is an onerous burden to fix a nonexistent problem. Further, the association said, regulation of the legal profession has traditionally been left to the state and ethical rules already provide protections for clients.

As this Bar News went to press, the matter was still pending before the FTC.

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