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It’s Déjá Vu All Over Again . . . Again: FTC Delays Red Flags Rule until June 1, 2010; Congress May Exempt Small Employers

Business Law Alert Sarah E. Coyne, Kevin J. Eldridge, Margaret E. Utterback, Kathryn A. Kronquist

On October 30, 2009, the Federal Trade Commission ("FTC") announced that it will again delay enforcement of the Red Flags Rule (which implements portions of the Fair and Accurate Credit Transactions Act, "FACTA"). Covered financial institutions and creditors must now comply with the Red Flags Rule by June 1, 2010…unless of course there is another delay! The FTC's decision to delay the compliance date, which occurred yet again on the eve of the compliance date, comes upon the heels of two relevant developments relating to concern over the breadth of the FTC's interpretation of FACTA, in promulgating the Red Flags Rule.

The first such development is that the U.S. House of Representatives passed a bill to exempt health care providers, accounting practices, legal practices, and other businesses with twenty or fewer employees from regulation under the Red Flags Rule. H.R. 3763 passed the full House 400-0 and is awaiting action in the Senate. The second development is that on October 30, the U.S. District Court for the District of Columbia held that the FTC could not apply the Red Flags Rule to attorneys. That proceeding continues, unaffected by the new delay of the Rule's compliance date.

The FTC announcement of the delay is available here.

We will keep you informed of any further developments involving the Red Flags Rule.

For more information on the Red Flags Rule, please see previous Health Law Updates: April 2009, May 2009, July 2009, or see the Corporate Services Update: August 2009.

If you have any questions about the Red Flags Rule, please contact Sarah Coyne at (608) 283-2435 / sarah.coyne@quarles.com, Kevin Eldridge at (608) 283-2452 / kevin.eldridge@quarles.com, Maggie Utterback at (608) 283-2443 / margaret.utterback@quarles.com, Kate Kronquist at (414) 277-5397 / kathryn.kronquist@quarles.com or your Quarles & Brady lawyer.