Nov 202010
 November 20, 2010  Posted by  Breaches, Laws

Hunton & Williams have an informative law blog, Privacy and Information Security Law Blog, and if you haven’t already bookmarked, you should.   Yesterday they wrote:

On November 17, 2010, Representative John Adler (D-NJ) introduced the Red Flag Program Clarification Act of 2010 (H.R. 6420) to “amend the Fair Credit Reporting Act with respect to the applicability of identity theft guidelines to creditors.”  The bipartisan bill seeks to limit the scope of the FTC’s Identity Theft Red Flags Rule, which requires “creditors” and “financial institutions” that have “covered accounts” to develop and implement written identity theft prevention programs to help identify, detect and respond to patterns, practices or specific activities that indicate possible identity theft.

If passed, H.R. 6420 would add a more narrow definition of “creditor” to Section 615(e) of the FCRA, which reads, “any person who regularly extends, renews, or continues credit; any person who regularly arranges for the extension, renewal, or continuation of credit; or any assignee of an original creditor who participates in the decision to extend, renew, or continue credit.”  In response to concerns that the current FCRA definition improperly extends the Red Flag’s scope to implicate certain entities, including attorneys, law firms and health providers, the proposed definition would exclude those “that advance funds on behalf of a person for expenses incidental to a service provided by the creditor to that person.”


What does that last exclusion mean?  What do they mean “advance funds… for expenses incidental…?” Can anyone translate that into plain English, please?  If a non-physician healthcare provider allows a patient to “pay them later,” does that constitute an “advance of funds?”

In May 2010, the American Psychological Association had reported that

the House passed a bill that would exempt from the Red Flags Rule psychology (and other health care) practices with 20 employees or fewer. …. The House bill, H.R. 3763, passed with 400 votes and no objections. The APA Practice Organization supports the passage of similar Red Flags Rule legislation in the Senate. The Senate has not yet taken action on this legislation.

H.R.3763 is not the same bill as H.R.6420.  The former passed the House in October 2009 and has yet to see any action in the Senate.   So why has the Senate seemingly done nothing on this issue?

  2 Responses to “House Bill to Limit Scope of Red Flags Rule with Amended “Creditor” Definition”

  1. I think the “advance funds” language is not for doctors but rather for lawyers — who traditionally regularly pay things like court filing fees and deposition costs and then bill them to the client.

  2. That would make sense.

    Is legislation allowed to make sense? 🙂

    And where does H.R. 6420 leave small private practices like mine? Would I be subject to the Red Flags Rule? I realize you can’t give me legal advice, but what’s your take on what this bill would mean? The earlier House bill was written in a way that I could figure out that I’d be exempt, but this one baffles me.

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