Montgomery, Ala., July 6, 2009 – The Alabama State Bar became the latest lawyers' organization to protest new Federal Trade Commission rules requiring lawyers to become involved in preventing identity theft, calling the move unauthorized, unnecessary and an impediment to preserving the attorney-client relationship.
The state bar's objections follow those submitted by the American Bar Association and statewide bar associations in Arkansas, Colorado, Illinois, Ohio and Virginia. The rules, which are slated to take effect on Aug. 1, implement a 2003 statute aimed at curbing identity theft.
State Bar President J. Mark White of Birmingham (White Arnold & Dowd P.C.) sent a letter to FTC Chairman Jonathan D. Leibowitz noting, "Applying the Red Flags Rule to lawyers and law firms is unnecessary. Not only is implementation of the rule a resource intensive task, but the burden of compliance for low risk entities such as a law firm far out weighs any perceived benefit that might inure to a client. In the case of a law firm, the identify theft addressed by the rule would occur only in the event an individual pretended to be someone else either to fraudulently initiate a client-lawyer relationship or to obtain legal services under the pretext that the person is another individual who is already a client of the lawyer. Thus, a person would not only have to assume someone else's identity, but their legal need as well."
The 2003 statute, called the Fair and Accurate Credit Transactions Act, requires financial institutions and creditors to develop protocols to detect and prevent identity theft. Those institutions are also required to take measures when "red flags" signaling identity fraud are detected, including possibly reporting the warning signs to law enforcement.
White said, "Lawyers and law firms do not engage in the types of commercial activity that Congress was attempting to regulate under FACTA and thus should not be deemed 'creditors' for the purposes of this act. Lawyers practice under a stringent ethical system in which legal fees are subject to sanction if they are found excessive under established standards."
The 16,000-member Alabama State Bar is dedicated to promoting the professional responsibility, competence and satisfaction of its members, improving the administration of justice and increasing public understanding and respect for the law.