“Red Flags” Rules Clarified (December 13th, 2010)

The United States Senate and the House of Representatives have voted to exempt lawyers and other service providers from the so-called Red Flags Rule. The law, applicable to “creditors” who provide services before being paid, would have required onerous record-keeping requirements in order to curtail identity theft. Initially, the FTC opined that attorneys, physicians, accountants, and other service providers would be considered creditors under the law and subject to its requirements. Congress has now made clear that the law was never intended to include such groups and they “will no longer be classified as ‘creditors’ for the purposes of the red flags rule just because they do not receive payment in full from their clients at the time they provide their services, when they don’t offer or maintain accounts that pose a reasonably foreseeable risk of identify theft,” Sen. Chris Dodd (D-Conn.) said.

The bill, known as the Red Flag Program Clarification Act of 2010, will now go to President Obama for signature.