A contact at the American Bar Association (ABA) confirmed by telephone today that the ABA Board of Governors is meeting this Saturday, June 13, 2009 to determine what position the ABA will take on whether lawyers and law firms are (or should be) considered "creditors" subject to federal Red Flags Rules. Many among the legal community are hoping that the ABA urges the FTC and Congress to exempt lawyers from compliance with federal Red Flags Rules or takes some other action to limit the scope of the FTC’s enforcement. (For background on the Red Flag Rules, see our prior postings here, here and here).
The FTC has previously indicated that it plans to enforce the Red Flags Rules against lawyers along with any other business that sells goods or services now and bills its customers later (see our prior discussion here). However, according to the ABA, the first it heard of this issue was when federal regulators notified the ABA of the government’s position on April 23, 2009. This was just a week before the FTC was to begin enforcement of the Red Flags Rules. The next day, after the FTC attended an emergency meeting with the ABA Government Affairs Office, President H. Thomas Wells, Jr. directed a letter to FTC Chairman Jonathan D. Leibowitz (.pdf) requesting an additional three to six months delay in enforcement so that the ABA could consider its stance on this issue. The FTC appears to have acquiesced to the ABA request a few days later, when the FTC postponed the May 1, 2009 enforcement deadline until August 1, 2009 .
In the president’s letter as well as a separate public statement (.pdf), the ABA indicated that "some" believe that federal precedent contradicts the FTC’s expansive interpretation of the law (for more information, see our detailed discussion of the caselaw here and here). The ABA has also noted that "the FTC has no examples of identity theft arising from an attorney-client relationship."
Given the looming compliance deadline, it seems likely that we will hear from the ABA shortly — possibly as early as next week. In view of the FTC’s response (.pdf) to the public objection raised by the American Medical Association (.pdf), the ABA may need to take a different tack to effect a change in the FTC’s enforcement policy.
[I should note that an attorney in California called me up yesterday to discuss the FTC’s view that that lawyers should be considered "creditors" subject to federal Red Flags Rules. Thanks are owed to her for raising the question of whether the ABA has articulated a view on this issue.]
- The April 24, 2009 ABA letter to the FTC (.pdf), also available from the ABA website (.pdf).
- Public statement on Red Flags Rules by the ABA (.pdf)