The Federal Trade Commission cannot force practicing lawyers to comply with new regulations aimed at curbing identity theft, a federal judge ruled today at the U.S. District Court for the District of Columbia.
The decision offers a reprieve to law firms across the country, which faced a deadline this weekend to put in place programs to meet so-called “Red Flags Rule” requirements. The rules would have forced firms to verify the identities of potential clients.
The American Bar Association, represented by a Proskauer Rose team led by partner Steven Krane, argued that the rules would impose a serious burden on law firms, and sought an injunction and declaratory judgment finding that lawyers were not covered by the rule. The FTC contended that lawyers should be covered, because many of their billing practices, such as charging clients on a monthly basis rather than up front, made them “creditors.”
Judge Reggie Walton said he had trouble accepting the FTC’s definition of a creditor. He said that under their interpretation, a plumber who charges a customer after working on a toilet for two days would be also be considered a "creditor."
“I have a real problem with concluding that Congress intended to regulate lawyers when these statutes were enacted,” Walton said.
Proskauer’s Krane said the judge’s ruling granted all of the relief the ABA sought in the case, but that he expected the FTC to try and appeal.
Asked whether they would appeal the ruling, FTC General Counsel Willard Tom said, “It’s safe to assume the commission is going to consider its options very seriously. We think there is no reason lawyers should be exempt.”