On December 1, 2009, the U.S. District Court for the District of Colombia issued a written opinion siding with the American Bar Association’s (ABA) challenge against the Federal Trade Commission’s (FTC) Red Flags Rule and prohibiting the FTC from enforcing its Rule against attorneys.
Among its reasons for so holding, the court declined to classify attorneys as “creditors” under the Rule. The court stated that “credit is a specific subset of activity…which does not logically or commonly apply to attorney billing practices.” The court went on to note that attorneys are not granting clients the right to postpone payment simply because they do not demand immediate payment from clients. Rather, attorneys invoice clients for their own convenience, because of ethical rules which prohibit payment for services not yet rendered, and because of the unpredictable nature of the practice of law, which would make it unreasonable for attorneys to immediately calculate and collect their fees.
The court’s ruling could well have a significant impact beyond the legal arena, as several professions, including health care providers, have made similar arguments as to why they should not be subjected to the FTC’s Red Flags Rule.