[ Thursday, December 02, 2010 ]


Red Flags Update: The Senate has unanimously passed the Red Flag Program Clarification Act, which establishes a definition of "creditor" that will reduce the likelihood that doctors, lawyers, accountants, and others who are paid after they provide services, rather than before, are subject to the Red Flags Rule. Previous proposed legislation focused on the size of the entity or the specific services provided to determine whether the Red Flags Rule applied, but this amendment signifies a different approach.

It's still possible that doctors, lawyers and others could be considered "creditors" and therefore subject to the Red Flags Rule, if the entity engages in credit transactions, advances funds to customers, or otherwise "offers or maintains accounts that are subject to a reasonably forseeable risk of identity theft." It's possible that the FTC could take an expansive approach to this definition. However, the legislative intent (including specific statements by Chris Dodd and Mark Begich) makes clear that doctors, lawyers and other small business should be free from the Red Flags Rule (if the House passes the bill and the President signs it).

Jeff [11:31 AM]

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