Legislation Clarifying the Application of the “Red Flags” Rule Clears Congress

On Nov. 30, the Senate passed bipartisan legislation, the “Red Flag Clarification Act of 2010” (S. 3827) by unanimous consent. The House passed the measure Dec. 7, and it has been sent to the President for approval.

In response to legislation from 2003, the Federal Trade Commission (FTC) issued regulations that would require “creditors” to implement internal programs to detect and respond to patterns, practices or specific activities – so-called “Red Flags” – that could help root out potential identity theft. The term “creditor” was broadly defined and included physician practices and other professionals as creditors when their patients or clients paid after the services were provided. Recognizing that the rule would create hardships for numerous small businesses, including medical and other professional practices, the FTC had delayed enforcement through the end of the year and asked Congress to pass legislation to resolve questions on which entities should be covered as “creditors.”

According to Senator Dodd, the Chairman of the Senate Banking Committee, “The legislation also makes clear that lawyers, doctors, dentists, orthodontists, pharmacists, veterinarians, accountants, nurse practitioners, social workers, other types of health care providers and other service providers will no longer be classified as ‘creditors’ for the 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.”

2010-12-10T00:00:00+00:00 December 10th, 2010|Advocacy|