Judge Reggie B. Walton of the United States District Court for the District of Columbia recently granted an injunction sought by the American Bar Association (“ABA”) that prohibits the Federal Trade Commission (“FTC”) from enforcing the Red Flags Rule against attorneys. Judge Walton’s memorandum opinion was released December 1, 2009, detailing the legal reasoning behind his judgment. To view the memorandum opinion, click here. The release of the memorandum opinion marks the start of a 45-day time frame in which the FTC is permitted to file an appeal.
The Red Flags Rule requires certain entities defined as “creditors” and “financial institutions” to implement programs to detect and respond to warning signs (or “red flags”) indicating possible identity theft. In his memorandum opinion, Judge Walton found that the FTC had exceeded the authority granted to it under the Fair and Accurate Credit Transactions Act of 2003 (“FACTA”) in applying the Red Flags Rule to attorneys. In his analysis of FACTA’s language and purpose, he found that the Act was not created as a means of preventing all types of identity theft, but in order to “eliminate a specific kind of identity theft: identity theft in the credit industry.” (p. 16.)
As we noted here, the American Institute of Certified Public Accountants (“AICPA”) has recently filed a similar lawsuit against the FTC, seeking to enjoin the FTC from applying the Red Flags Rule to AICPA members.
