The Federal Trade Commission (FTC) is delaying enforcement of the "Red Flags" rule through December 31 of this year. The delay is due to the request of members of Congress as they consider legislation that impacts the scope of the rule.

Senators John Thune (R-S.D.) and Mark Begich (D-AK) recently introduced the bill (S. 3416) specifically exempting health care practices with 20 or fewer employees from the rule. Accounting and legal practices of that size would also be exempted.

The FTC's announcement of the delay comes shortly after the American Medical Association and other medical industry associations filed suit to stop the rule from being applied to health care professionals. (See, DM 12779).
The Red Flags Rule requires creditors and financial institutions to adopt programs that prevent identity theft, as mandated by the Fair and Accurate Credit Transactions Act of 2003 (FACTA). FACTA's definition of "creditor" includes any entity that extends credit on a regular basis or arranges for others to do so, and all entities that regularly permit deferred payments for goods or services. Since its implementation, controversy has surrounded the applicable scope of the rule, particularly for health care professionals who accept delayed or partial payment. If a doctor's office allows patients to pay in installments, does that mean the providers are effectively creditors? If so, they would fall under the rule and be required to implement sophisticated safeguards.

Although the rule was effective on January 1, 2008, enforcement of the rule has been delayed several times. The FTC is requesting that Congress finalize legislation regarding the scope of the rule and preclude further delays in enforcement. The agency says that if Congress passes legislation with an effective date earlier than December 31, it will begin enforcement on that date.

Further material on the Red Flags rule can be found at: www.ftc.gov/redflagsrule

Adapted in part from a FTC press release.

Link: http://www.ftc.gov/opa/2010/05/redflags.shtm

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