• Oops, They Did it Again: The FTC Extends the Red Flags Rule Deadline Until December 31, 2010
  • June 10, 2010 | Authors: Sarah Edelman Coyne; Kevin J. Eldridge; Kathryn A. Kronquist; Margaret E. M. Utterback
  • Law Firms: Quarles & Brady LLP - Madison Office ; Quarles & Brady LLP - Milwaukee Office ; Quarles & Brady LLP - Madison Office
  • Once again on the eve of enforcing the Red Flags Rule, the Federal Trade Commission (“FTC") announced on May 26, 2010, that it was extending the enforcement deadline until December 31, 2010. This time, the FTC said it was extending the deadline to give Congress time to consider H.R. 3763, which would exempt small health care, legal and accounting practices from the Red Flags Rule. (See our prior update on the Red Flags Rule for a discussion of H.R. 3763.)

    The extension follows on the heels of a lawsuit against the FTC filed by the American Medical Association, the American Osteopathic Association and the Medical Society for the District of Columbia (the “Medical Associations”) that seeks to prevent the FTC from applying the Red Flags Rule to physicians. You can find a copy of the lawsuit on the AMA’s website.

    In its announcement about the December 31 extension, the FTC claims its hands are tied, and that it is required by law to apply the Red Flags Rule to a broad range of industries. But, the FTC is not that innocent. (Okay, sorry for that second Britney Spears reference. We just couldn't help ourselves.) At the end of 2009, the U.S. District Court for the District of Columbia prohibited the FTC from applying the Red Flags Rule to attorneys, because the FTC did not have statutory authority to apply the Rule to attorneys. The court noted that the language of the Fair and Accurate Credit Transactions Act (the statutory authority relied on by the FTC) implies that the act “was created to apply to entities involved in banking, lending, or financial related businesses.” That case is still on appeal.