Implementation of “Red Flags” Rule Delayed

On July 20 I warned you about new federal regulations known as the "Red Flag" rules, which require businesses, including lawyers and law firms, to take pro-active measures to detect and prevent identity theft.  The rules were scheduled to go into effect on August 1.

The FTC, the agency charged with the responsibility to enforce the rules, has delayed enforcement of the rules until November 1, 2009.  The following is from the FTC press release:

Commission staff will create a special link for small and low-risk entities on the Red Flags Rule Web site with materials that provide guidance and direction regarding the Rule. The Commission has already posted FAQs that address how the FTC intends to enforce the Rule and other topics – The enforcement FAQ states that Commission staff would be unlikely to recommend bringing a law enforcement action if entities know their customers or clients individually, or if they perform services in or around their customers’ homes, or if they operate in sectors where identity theft is rare and they have not themselves been the target of identity theft.

The three-month extension, coupled with this new guidance, should enable businesses to gain a better understanding of the Rule and any obligations that they may have under it. These steps are consistent with the House Appropriations Committee’s recent request that the Commission defer enforcement in conjunction with additional efforts to minimize the burdens of the Rule on health care providers and small businesses with a low risk of identity theft problems.

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