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WASHINGTON – The Federal Trade Commission has urged the D.C. Circuit to reverse a district court ruling that held that regulations designed to combat identity theft don’t apply to attorneys.

The so called “red flags” rules require businesses that accept deferred payments from clients to create written policies outlining how they will prevent, detect and address identity fraud. The rules were designed to apply to financial services businesses, but FTC officials said that other businesses – including law practices – would be covered as well.

The American Bar Association sued the agency last year, arguing that the FTC exceeded its authority by imposing the regulations on attorneys outside of the financial sector. The FTC countered that under the Fair and Accurate Credit Transactions Act, attorneys who accept deferred payments from clients are creditors.

The group later moved for – and was granted – partial summary judgment in U.S. District Court for the District of Columbia, which held that that Congress did not intend for lawyers to be considered “creditors” under the Act. The FTC appealed.

In its brief, the FTC said that Congress intended the law to apply to “any entity that provides credit.”

“Not only does the statute provide no exception for lawyers, but its legislative history indicates that Congress intentionally chose a broad definition for ‘credit,’ and subjecting lawyers who extend credit is entirely consistent with the statutory purposes,” the brief states.

Oral arguments in the case have not yet been scheduled.

-Kimberly Atkins

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