Red Flags Rules Postponed Until Nov. 1, 2009

The Federal Trade Commission (FTC) announced last month it has delayed enforcement of the "Red Flags" Rule until November 1, 2009, although the rule is in effect already and practices are expected to be in compliance.

Background: Veterinarians and the "Red Flags Rule"

On November 9, 2007, the FTC issued a rule that may affect your veterinary practice. The "Red Flags" Rule, 16 C.F.R. § 681.2, 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 ("FACT Act") of 2003, a federal law which requires the establishment of guidelines for financial institutions and creditors regarding identity theft.

Health care professionals, including veterinarians, fall into the category of "creditors" because they do not always receive payment in full from their clients at the time of treatment. On January 30, 2009, the AVMA Governmental Relations Division (GRD) sent a letter to the FTC requesting that veterinarians be excluded from the Rule. On March 19, 2009, the FTC responded to the AVMA, stating that veterinarians and other health care providers will be subject to the "Red Flags" Rule. However, the FTC indicated willingness to continue dialog to ensure that compliance with the Rule will not place undue burdens on the veterinary profession.

The FTC initially suspended enforcing the "Red Flags" Rule until May 1, 2009. The AVMA Government Relations Divisions held meetings on Capitol Hill to raise awareness about FTC's plans to apply Red Flags to veterinarians. As a result of these meetings, Rep. Nadia M. Velazquez (D-NY-12), Chair of the House Small Business Committee, wrote a letter to the FTC expressing her concern about the impact of Red Flags on health professionals. She urged the FTC to, at the very least, delay implementation of the rule. Very importantly, she encouraged the FTC to issue a revised proposed rule and provide veterinarians as well as other health care providers an opportunity to formally comment on any economic burdens the rule would impose on their businesses.

In response to Rep. Velazquez's entreaty, the FTC voted on April 30 to delay enforcement to August 1, 2009 to allow creditors additional time to develop and implement written identity theft prevention programs. On July 29, 2009, the FTC once again delayed enforcement of the Rule until November 1, 2009. Keep in mind, however, that the Rule is in effect now and veterinarians are expected to comply. For more information, go to http://www.avma.org/issues/FTC_red_flags_rule.asp