Health Care Law Update - New Law Exempts Physicians, Dentists and Other Professionals From Red Flag Rules


Under the recently enacted Red Flag Program Clarification Act of 2010, most physicians, dentists and other professionals will no longer be defined as "creditors" under the "Red Flag Rules." President Obama signed the legislation as enacted by Congress.

The Red Flag Rule was designed to require creditors such as banks, credit card companies and other lenders, to implement various safeguards to protect their clients from identity theft.  The original Red Flag Rule defined "creditor" very broadly, and the FTC initially interpreted it to apply to professionals, including accountants, lawyers, physicians and dentists who bill their clients for services.  

After being deluged with complaints, the FTC assured physicians and other professionals that it was pushing Congress to work quickly to fix the Red Flag Rule, stating that the Red Flag Rules had "unintentionally swept up countless small businesses – including every doctor, dentist, lawyer, gardener, plumber, and housekeeper who bill customers on a monthly basis." The Red Flag Program Clarification Act of 2010 redefines "creditor" as one that regularly and in the course of business (1) obtains and uses consumer (credit) reports, (2) furnishes information to consumer reporting agencies, or (3) advances funds to or on behalf of a person based upon an obligation to repay the funds or repayable from specific property pledged by or on behalf of the person.  In addition, a creditor does not include a creditor that advances funds on behalf of a person for expenses incidental to a service they provide to that person.  The effective date of the Red Flag Rules has been delayed several times. It is currently scheduled to take effect for other creditors on January 1, 2011.

As amended, the vast majority of practices will fall outside the definition of "creditor" and thus not need to comply with the Red Flag Rules.

Although the Red Flag Rules may exempt  your practice, it is still advisable to implement policies to guard against identity theft in your practice. 

Please contact Paul Gilman by email at or by telephone at 312.755.3168 if you would like additional information.

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