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Oops, They Did it Again: The FTC Extends the Red Flags Rule Deadline Until December 31, 2010

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

Once again on the eve of enforcing the Red Flags Rule, the Federal Trade Commission ("FTC") announced on
May 26, 2010, that it was extending the enforcement deadline until December 31, 2010. This time, the FTC said it was extending the deadline to give Congress time to consider H.R. 3763, which would exempt small health care, legal and accounting practices from the Red Flags Rule. (See our prior update on the Red Flags Rule for a discussion of H.R. 3763.)

You can find the FTC press release here.

The extension follows on the heels of a lawsuit against the FTC filed by the American Medical Association, the American Osteopathic Association and the Medical Society for the District of Columbia (the "Medical Associations") that seeks to prevent the FTC from applying the Red Flags Rule to physicians. You can find a copy of the lawsuit on the AMA's website.

In its announcement about the December 31 extension, the FTC claims its hands are tied, and that it is required by law to apply the Red Flags Rule to a broad range of industries. But, the FTC is not that innocent. (Okay, sorry for that second Britney Spears reference. We just couldn't help ourselves.) At the end of 2009, the U.S. District Court for the District of Columbia prohibited the FTC from applying the Red Flags Rule to attorneys, because the FTC did not have statutory authority to apply the Rule to attorneys. The court noted that the language of the Fair and Accurate Credit Transactions Act (the statutory authority relied on by the FTC) implies that the act "was created to apply to entities involved in banking, lending, or financial related businesses." That case is still on appeal.

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 updates: April 2009, May 2009, July 2009, August 2009, and November 2009.

If you have any questions about the Red Flags Rule, please contact Sarah Coyne at (608) 283-2435 / [email protected], Kevin Eldridge at (608) 283-2452 / [email protected],
Maggie Utterback at (608) 283-2443 / [email protected], Kate Kronquist at (414) 277-5397 / [email protected] or your Quarles & Brady attorney.

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