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Sunday, May 19, 2024 | Back issues
Courthouse News Service Courthouse News Service

Court Dismisses Lawyers’ Suit Over Red Flags Rule

(CN) - New amendments to a federal policy that protects consumers from identity theft have undermined the American Bar Association's challenge to the regulations, which the group feared would unfairly target lawyers and other professionals, the D.C. Circuit ruled.

The ABA's lawsuit took issue with a provision of the Fair and Accurate Credit Transactions Act that expanded the definition of "creditors" to include lawyers who accept deferred payments from clients. This finding triggers the Federal Trade Commission's identity-theft hurdle known as the Red Flags Rule, which requires creditors and financial institutions to have prevention programs in place to protect consumers from identity theft.

A federal judge in Washington, D.C., awarded summary judgment to the bar association in 2009 and enjoined the FTC from enforcing the policy against lawyers.

Shortly after the D.C. Circuit heard oral arguments on the FTC appeal of the lower court's decision, Congress passed the Red Flag Program Clarification Act.

"There can be no confusion here that the Clarification Act served to moot the ABA's claims in this case," Senior Judge Harry Edwards wrote for the circuit's three-judge panel on Friday. "The new legislation is clearly aimed at the precise matter in dispute."

Edwards added that the Clarification Act changed the challenged definition of creditor to state "that a creditor's allowance of deferred payments alone could not trigger the identity theft protections.

Since the new legislation eliminates the need for judicial intervention, the court vacated the District Court's judgment and opinion, and remanded the case for dismissal.

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