The Federal Trade Commission (FTC) and the ABA (American Bar Association) are set to square off in court over the FTC’s latest set of regulations governing creditors’ procedures designed to prevent identity theft. What’s wrong with that? Well, the regulations, known as “Red Flag Rules“, define creditors as including attorneys. The ABA has filed a complaint in the District of Columbia federal court to seek a ruling from the judge that the FTC rule does not apply to attorneys. ABA’s position is that there is no benefit to applying the definition to attorneys and that the rule invades each state’s regulation of attorneys.
The ABA representative’s press release states: “The Rule requires extensive reporting and bureaucratic compliance that would unnecessarily increase the cost of legal services. This kind of unauthorized and unjustified federal regulation of law practice threatens the independence of the profession and the lawyer’s role as client confidante and advocate.” (in English — the rule makes a lot of work for attorneys and would make everything cost more. The federal government should stay out of the day-to-day office procedures of attorneys and this rule interferes with the attorney client relationship.
The FTC’s Red Flag Rules would require creditors/financial institutions to develope a written program which would identify “red flags” of identity theft: “ These may include, for example, unusual account activity, fraud alerts on a consumer report, or attempted use of suspicious account application documents. The program must also describe appropriate responses that would prevent and mitigate the crime and detail a plan to update the program. The program must be managed by the Board of Directors or senior employees of the financial institution or creditor, include appropriate staff training, and provide for oversight of any service providers.”
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