Amidst calls from the legal community, the Federal Trade Commission’s (FTC) announced this morning that it was delaying enforcement of the FTC’s Red Flag Rules until November 1, 2009. The FTC’s announcement of the delay emerged almost as a footnote to a public statement devoted largely to the FTC’s "redoubled" efforts to "provid[e] additional resources and guidance to clarify whether businesses are covered by the Rule and what they must do to comply." The FTC appears to be stepping up its outreach efforts with an "Expanded Business Education Campaign" that is intended to address those businesses that "remain uncertain about their obligations." This seems aimed at the recent statements from the American Bar Association (ABA), which has called on the FTC and Congress to exempt lawyers from the FTC’s Red Flags Rules and threatened to sue the FTC to stop any enforcement action against the legal industry.
To recap the events leading up to this postponement: in April, the ABA received word that the FTC intended to enforce the FTC’s Red Flags Rule, 16 CFR Part 681, against lawyers. The ABA immediately asked the FTC to extend the May 1, 2009 deadline and the FTC obliged by postponing the deadline until August 1, 2009 (see our post on this topic). After a few months of thought, the ABA publicly called on the FTC and Congress to exempt lawyers from the Red Flags Rule. The ABA’s June report on "Why the Red Flags Rule Should Not Apply to Lawyers" lays out a legal argument for why billing a client is not really an extension of credit that turns every lawyer and law firm into a "creditor" under Red Flags Rule and the Fair and Accurate Credit Transactions Act (the FACT Act). More recently, ABA President H. Thomas Wells, Jr. told the Blog of Legal Times that the ABA plans on filing a federal lawsuit during the this week to block enforcement of the Red Flags Rule, if "we don’t get some kind of sign." And, perhaps on the ABA’s urging, a House Appropriations subcommittee apparently asked the FTC to postpone its deadline yet again. Other blogs and websites have been abuzz with "sources" close to the discussions between the ABA and the FTC and then today, the FTC announced that delayed the enforcement deadline yet again.
Lest anyone think that the ABA is on its own on this issue, the Massachusetts Bar Association sent the FTC a letter objecting to the application of the Red Flags Rules to lawyers and the New York County Lawyers Association also issued a report objecting to enforcement against lawyers. State bar associations are joining the ABA in calling on the FTC to excuse them from the reach of the "new" regulations (which are, in fact, more than a year old at this point, after numerous delays in enforcement by the FTC).