The New York State Bar Association Monday became the latest bar group to protest new Federal Trade Commission rules requiring lawyers to become involved in preventing identity theft, calling the move unauthorized, unnecessary and destructive to the attorney-client relationship.

The State Bar’s objections follow those submitted last week by the American Bar Association and the New York County Lawyers’ Association.

In addition, the ABA reports that statewide bar associations in Arkansas, Colorado, Illinois, Ohio and Virginia have also contacted the FTC to express their opposition, with Oregon and Wisconsin expected to follow shortly.

The rules, which are slated to take effect on Aug. 1, implement a 2003 statute aimed at curbing identity theft.

The first shot was fired by the ABA, with its president, H. Thomas Wells, issuing a statement on June 22 denouncing the rules as imposing “an undue burden on law firms, especially solo practitioners,” while accomplishing “very little.”

Three days later, the New York County Lawyers delivered a report to the FTC objecting that the rules have “the potential to intrude on the profoundly confidential nature of the lawyer-client relationship that is now regulated by the states through the Rules of Professional Conduct.”

On Monday New York State Bar President Michael E. Getnick sent a letter to FTC Chairman Jonathan D. Leibowitz decrying the new rules as “unnecessary and beyond the intent of Congress.”

The 2003 statute, the Fair and Accurate Credit Transactions Act, 15 U.S.C. §1681(m)(e), requires financial institutions and creditors to develop protocols to detect and prevent identity theft. Those institutions are also required to take measures when “red flags” signaling identity fraud are detected, including possibly reporting the warning signs to law enforcement.

Read information from the FTC on the “Red Flags” rule, the ABA statement and the NYCLA report.

Betsy Broder, an assistant director at the FTC unit responsible for combating identity theft, said the agency has no discretion under the 2003 statute to exclude lawyers and other professionals from the statutory definition of “creditor.”

David A. Lewis of Proskauer Rose, the author of the county lawyers’ report, said the new rule “chills the lawyer client relationship” because it “requires lawyers to grill their own clients” for any indication that “they are engaged in suspicious activity involving identity theft.”

The ABA’s Wells, in his statement, contended that Congress did not intend to apply the 2003 law’s definition of “creditors” to lawyers who “merely bill for services after they are rendered.”

“Regardless of the specifics of billing arrangements,” Wells stated, “lawyers cannot ethically charge for legal services until they are rendered.”

The FTC has not identified “a single case of identity theft in the legal services context, suggesting that such a scenario is far-fetched, if not impossible,” he added.

Amplifying that point, Wells stated, the rule only addresses identify theft where a client assumes someone else’s identity, which would also require an imposter to assume someone else’s legal needs as well as their identity.

Moreover, Wells contended that the 2nd U.S. Circuit Court of Appeals in Shaumyan v. Sidetex Co., 900 F. 2d 16 (1990), has already ruled that legal fees are not “credit transactions.”

Broder, of the FTC, countered that the “plain language” of the definition of creditor referenced in the 2003 act “very broadly defines” creditors as any business that “regularly allows its customers to defer payment.”

A broad definition is necessary to carry out the purposes of law, Broder said, because “identity thieves are looking for goods and services without having to put cash on the barrel head — that is precisely the type of situation where a person can trick the system.”


This is not the first time lawyers have battled the FTC over its attempt to regulate them under a federal statute. In 2005, the ABA and the New York State Bar Association won a lawsuit that barred the FTC from imposing broad requirements to protect customer privacy under the Graham-Leach-Bliley Act, of 1999, American Bar Association v. Federal Trade Commission, 430 F. 3d 457 (2005).

The New York County Lawyers’ has set up a platform on its Web site,, where its more than 10,000 lawyers can vote on whether they support or oppose the FTC rule.

Though the voting platform was made available on June 9, only 11 members had voted as of yesterday, with ten opposing the rules.

Anita Aboulifia, a spokeswoman for the association, said voting is likely to pick up once the group’s newsletter spotlights the controversy in its next issue which will be released in about a week.