We covered in a previous post ongoing litigation in the D.C. Circuit between the American Bar Association and Federal Trade Commission over the scope of the FTC’s Red Flags rule.  On January 20, 2011, the FTC filed a supplemental brief analyzing the impact of the recently-enacted Red Flag Program Clarification Act of 2010 on the permissible scope of the rule.  The ABA filed a response brief on February 3, 2011, and the FTC filed a reply brief on February 10, 2011. 

The ABA’s response brief emphasized the view that Congress never intended for the Red Flags requirements to apply to lawyers and used the Clarification Act and its deliberations in Congress as further evidence of that congressional intent.  The Clarification Act does not contain an express authorization for the FTC to apply the Red Flags rule to attorneys and, in fact, narrows the definition of “creditor.”  It points to legislative history that suggests Congress intended to prevent the FTC from applying the rule to professionals such as attorneys. 

The FTC’s reply brief argued that the Clarification Act provided no categorical exemption from the definition of “creditor” for attorneys and that the definition, as amended, continues to encompass certain attorney billing or credit arrangements.  Moreover, Congress considered but ultimately did not pass bills that explicitly exempted attorneys from the scope of the rule.

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Photo of Mike Nonaka Mike Nonaka

Michael Nonaka is a partner in the firm’s Financial Institutions practice group. He represents banks and other financial institutions on a wide variety of bank regulatory, enforcement, legislative and policy issues.  Mr. Nonaka also is co-chair of the firm’s Fintech Initiative and works…

Michael Nonaka is a partner in the firm’s Financial Institutions practice group. He represents banks and other financial institutions on a wide variety of bank regulatory, enforcement, legislative and policy issues.  Mr. Nonaka also is co-chair of the firm’s Fintech Initiative and works with a number of banks, lending companies, money transmitters, payments firms, technology companies, and service providers on innovative technologies such as big data, blockchain and related technologies, bitcoin and other virtual currencies, same day payments, and online lending.