Just when I thought Congress had completely lost its collective mind, a bit of sanity has crawled out from under Capitol Hill.
The AICPA reports that the Senate has passed the “Red Flag Program Clarification Act of 2010,” a measure that narrows the definition of “creditor” in the Fair Credit Reporting Act and thus likely excludes CPAs and CPA firms from having to comply with the Federal Trade Commission's “red flags rule,” which requires certain business entities to “develop and implement written identity theft prevention programs” that could detect the red flags that signal identity theft.
The American Bar Association Journal explains:
The legislation at issue, which seeks to curb identity theft among credit and financial regulatory agencies through prevention and detection programs, “makes clear” that lawyers, doctors, dentists, accountants and other heath care and service providers “will no longer be classified as 'creditors' for the purposes of the red flags rule just because they do not receive payment in full from their clients at the time they provide their services, when they don't offer or maintain accounts that pose a reasonably foreseeable risk of identify theft,” Sen. Chris Dodd (D-Conn.) said in a colloquy inserted in the record after the vote.
The Senate's vote comes in the nick of time. The FTC had established a Dec. 31, 2010 deadline to comply with the red flags rule. As Tom Hood reports, small businesses and non-profits will still have to comply by Dec. 31.
“The bill brings common sense to the Federal Trade Commission’s proposed red flags rule by clarifying that CPAs and CPA firms are not classified as creditors because they do not offer or maintain accounts that pose a risk of identity theft,” AICPA President and CEO Barry Melancon said in a statement. “The AICPA and state CPA societies fought tirelessly for this clarification over the past year. This change will relieve CPAs and CPA firms, already subject to confidentiality requirements, of the unwarranted burden of developing and implementing identity theft prevention and detection programs under the FTC rule.”
The measure now moves to the House, where, according to the ABA, “it currently faces no opposition.”