Red Flag Rule Clarification Act Passes!! What??

Red Flag Rule Clarification Act Passes!! What??

Most practicing lawyers probably haven’t followed this fight closely, but anxious bar officials breathed a sign of relief yesterday.  The U.S. House of Representatives followed the Senate in passing the Red Flag Program Clarification Act, exempting attorneys – and other professionals – who provide services before being paid from having to follow the FTC Red Flag Rule.

A part of regulations promulgated by the Federal Trade Commission in connection with the implementation of the Fair and Accurate Credit Transactions Act (FACTA), the Red Flag Rule sets out requirements for “creditors” to protect customer information from identity theft.  The FTC had originally defined creditors so broadly that any business which provided services on account, including lawyers, would have fallen under the rule, and would have been required to meet certain requirements for handling personally identifiable information of clients, notwithstanding the confidentiality requirements already imposed on lawyers.

The ABA had successfully challenged the application of the Red Flag Rule to lawyers in court, but that ruling is on appeal.  The passage of the clarification act should put an end to this issue for all time.