ABA files supplemental brief in 'Red Flags' case

By Kimberly Atkins The Daily Record Newswire BOSTON, MA -- Citing a law it says exempts lawyers and other professionals from the application of the controversial "Red Flags" rule, the American Bar Association has filed a supplemental brief in its case against the Federal Trade Commission over the rule's application to lawyers. The so-called "Red Flags" rule requires any business that accepts delayed payments from clients for services to create written policies outlining how it will prevent, detect and address identity fraud. After the rule was announced, the ABA sued the FTC, asserting that Congress did not intend for the rules promulgated under the Fair and Accurate Credit Transactions Act of 2003 (the FACT Act), under which the rule was created, to apply to attorneys. The ABA won summary judgment and the FTC appealed. But in December President Barack Obama signed into law the Red Flag Program Clarification Act of 2010, which limited the rule to businesses that use consumer reports in connection with credit transactions, furnish information to consumer reporting agencies in connection with a credit transaction or advance funds. But after enactment of the law, the FTC did not withdraw its appeal, nor did it change its enforcement policy that states the rule applies to lawyers, prompting the ABA to file a supplemental brief in the case. "Despite Congress's full knowledge of this litigation -- and the district court's holding that Congress must state with unmistakable clarity any intention to cover lawyers -- the Clarification Act contains not a single mention of lawyers or the practice of law," the brief states. "The inescapable conclusion is that Congress agreed with the district court's holding that lawyers were never intended to be covered." The FTC has until Feb. 10 to reply to the brief. Published: Wed, Feb 9, 2011