Bill to Narrow Red Flags Rules Moves Forward

It appears that certain groups, such as the American Bar Association (ABA), may be partially successful in their efforts to convince Congress to narrow the scope of the FTC Red Flags Rules, which are currently scheduled to go into effect on November 1.  According to the BNA Privacy & Security Law Report, the House Financial Services Committee has sent H.R. 3763, titled a bill “To amend the Fair Credit Reporting Act to provide for an exclusion from Red Flag Guidelines for certain businesses,” directly to the House floor without a markup.  The bill proceeded to the House floor after the Republican side of the Financial Services Committee consented to such a move.

The bill, which was introduced on October 8 by Rep. John Adler (D-N.J.), would exclude from the Red Flags Rules health care, accounting and legal practices with 20 or fewer employees.  It would also require the FTC, within 180 days, to issue regulations that set forth the process by which a business may apply for an exemption from the Red Flags Rules.

Of course, the passage of H.R. 3763 likely will not sufficiently narrow the Red Flags Rules in the eyes of the ABA, which has filed suit in federal district court in Washington D.C. to stop the application of the Red Flags Rules to all attorneys (see our prior post on this lawsuit).  In that case, the ABA has already moved for partial summary judgment, and the FTC has filed an opposition.  On October 13, ABA President Carolyn Lamm sent a letter to Rep. Barney Frank (D-MA), the chairman of the Financial Services Committee, urging lawmakers to exempt all attorneys from the rules.


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