Legal challenges update

Our article in the June issue of JNIS described the legal challenges against the Federal Trade Commission's Red Flags Rule, which requires “creditors” to adopt programs to protect their customers from identity theft. Specifically, on November 29, 2009, the US District Court for the District of Columbia ruled that the FTC had improperly applied the Red Flags Rule to lawyers in a case brought by the American Bar Association. The FTC appealed the decision. While the appeal was pending the President signed into law the Red Flag Program Clarification Act of 2011 (the “Clarification Act”).i

On March 4, 2011, the US Court of Appeals for the District of Columbia dismissed the ABA case as moot based on the passage of the Clarification Act.ii The US Court of Appeals found that the statute changed the definition of “creditor” in a way that vitiated the basis for the FTC's application of the Red Flags Rule to lawyers. Specifically, the Act defeated the FTC's conclusion that the …