President Obama Signs Legislation Limiting the Scope of the FTC Red Flags Rule

Published On December 20, 2010 | By ZwillGen | Data Security, Privacy
TwitterLinkedInFacebookRedditCopy LinkEmailPrint

On Saturday, President Obama signed the Red Flag Program Clarification Act of 2010, which limits the scope of businesses covered by the Red Flags Rule by narrowing the definition of “creditor” such that it “does not include a creditor that advances funds on behalf of a person for expenses incidental to a service provided by the creditor to that person.”  As emphasized by Sen. Christopher Dodd (D-CT), this legislation in effect,

“makes [it] clear that lawyers, doctors, accountants, dentists, orthodontists, pharmacists, veterinarians, nurse practitioners, social workers, other types of healthcare providers and other service providers will no longer be classified as ‘creditors’ for purposes of the Red Flags Rule just because they do not receive payment in full from their clients at the time they provide their services, when they don’t offer or maintain accounts that pose a reasonably foreseeable risk of identity theft.”

The Red Flags Rule, created under the Fair and Accurate Credit Transactions Act of 2003, was designed to protect consumers from identity theft by requiring creditors to develop programs for detecting and responding to identity theft.  The Federal Trade Commission (“FTC”) has postponed enforcement of the Rule several times to allow Congress to consider legislation regarding the scope of the rule.  The FTC is currently slated to begin enforcing the Rule on December 31, 2010.

Leave a Reply

Your email address will not be published. Required fields are marked *