President Obama Signs Red Flags Rule Exemption

On Dec. 18, 2010, President Obama signed into law S. 3987, a bill that removes certain businesses including most veterinary practices and other health care practices from the Federal Trade Commission (FTC)’s “Red Flags Rule.” The Senate and U.S. House of Representatives approved the measure unanimously in recent weeks.

The Red Flags Rule requires “creditors” and “financial institutions” to develop written plans to prevent and detect identity theft. The rule is a section of the Fair and Accurate Credit Transaction Act of 2003, a federal law which requires the establishment of guidelines for financial institutions and creditors regarding identity theft.

Although S. 3987 does not specifically mention veterinarians or any other professionals, it exempts from the definition of “creditor” those businesses that merely advance funds on behalf of a person for expenses incidental to a service provided. This definition is narrower than that adopted by the FTC, with the intent of exempting small businesses and other service providers who do not receive payment in full from their clients at the time they provide their services.

The FTC has delayed enforcement of the Red Flags Rule five times, most recently until December 31, 2010. The AVMA and 27 other organizations, including the U.S. Chamber of Commerce, American Medical Association, American Dental Association, Ambulatory Surgery Center Association, and American Academy of Family Physicians, have been lobbying Congress and the FTC to stop implementation of the Red Flags Rule for smaller health care professional practices.  Enactment of this legislation was the culmination of a successful advocacy effort that will save veterinary practices compliance expense and time.

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