Last Friday, the U.S. Court of Appeals for the D.C. Circuit issued its opinion in litigation between the American Bar Association (ABA) and the Federal Trade Commission (FTC) over the scope of the FTC’s Red Flags rule.  The Court held the ABA’s claims moot in light of recently-enacted legislation.   

The Red Flags rule requires covered entities to design and implement identity theft prevention programs.  In August 2009, the ABA challenged the FTC’s authority to enforce the rule with respect to attorneys.  In December 2010, Congress passed the Red Flag Program Clarification Act, which amended the definition of “creditor” in the underlying statute to limit the scope of the FTC’s rule.  We covered in previous blog posts the Act as well as supplemental briefs (here and here) filed by both parties arguing over the Act’s impact on the litigation.  The Court held that the ABA’s claims were now moot because the Act caused there to no longer be a case or controversy. 

The ABA’s claims for injunctive relief were premised on the original definition of “creditor” prior to passage of the Act.  The Court stated that “the policy, rule, and statute that gave rise to [the] suit are no longer in the same posture.”  The Court acknowledged that the FTC could promulgate new regulations seeking to subject attorneys to the Red Flags rule but dismissed it as a mere “hypothetical possibility” not giving rise to a live dispute. 

FTC Chairman Jon Leibowitz applauded the Court’s decision for vindicating the FTC’s contention that the case should be dismissed.

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Mike Nonaka Mike Nonaka

Michael Nonaka is co-chair of the Financial Services Group and advises banks, financial services providers, fintech companies, and commercial companies on a broad range of compliance, enforcement, transactional, and legislative matters.

He specializes in providing advice relating to federal and state licensing and…

Michael Nonaka is co-chair of the Financial Services Group and advises banks, financial services providers, fintech companies, and commercial companies on a broad range of compliance, enforcement, transactional, and legislative matters.

He specializes in providing advice relating to federal and state licensing and applications matters for banks and other financial institutions, the development of partnerships and platforms to provide innovative financial products and services, and a broad range of compliance areas such as anti-money laundering, financial privacy, cybersecurity, and consumer protection. He also works closely with banks and their directors and senior leadership teams on sensitive supervisory and strategic matters.

Mike plays an active role in 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 bitcoin and other cryptocurrencies, blockchain, big data, cloud computing, same day payments, and online lending. He has assisted numerous banks and fintech companies with the launch of innovative deposit and loan products, technology services, and cryptocurrency-related products and services.

Mike has advised a number of clients on compliance with TILA, ECOA, TISA, HMDA, FCRA, EFTA, GLBA, FDCPA, CRA, BSA, USA PATRIOT Act, FTC Act, Reg. K, Reg. O, Reg. W, Reg. Y, state money transmitter laws, state licensed lender laws, state unclaimed property laws, state prepaid access laws, and other federal and state laws and regulations.