FTC Red Flag Regulations:
U.S. Circuit Court Issues Ruling
By: Justin Vaughn, MDiv, CPC
Director of Compliance

March 18, 2011

The United States Court of Appeals, District of Columbia Circuit, has invalidated the Federal Trade Commission’s (FTC’s) definition of a creditor, as contained in the so-called Red Flags Rule (hereinafter, “Rule”).  Congress had already clarified the meaning of “creditor” in December, and the Court’s opinion acted to underscore that change. 

The FTC’s position had been that any entity that offers a deferred payment plan –including physician groups—is a creditor, and therefore would be subject to another layer of government regulation.  Specifically, the Rule requires creditors to draft and adopt an identity theft prevention program that would include a set of specified policies and procedures. 

While the D.C. Circuit Court’s ruling did not definitively state that physician groups could never fall within the parameters of the Red Flags Rule, the FTC will have to go through a formal rulemaking process if it elects to continue in its attempts to impose the Rule upon physicians.  Therefore, we have not heard the last on this issue.  For now, medical groups do not fall under the Rule, but there may be further battles to fight on this front.  As always, we will keep you informed of future developments.

The information presented herein reflects general information that is current as of the date it was first published.  In light of changes that may occur in the health care regulatory and compliance environments, the author's presentation of this information might become outdated.  Please check with your individual legal and/or compliance advisor(s) prior to taking any significant actions based upon the information and advice presented.