[Congressional Record Volume 156, Number 160 (Tuesday, December 7, 2010)]
[House]
[Pages H8059-H8060]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


               RED FLAG PROGRAM CLARIFICATION ACT OF 2010

  Mr. ADLER of New Jersey. Mr. Speaker, I move to suspend the rules and 
pass the bill (S. 3987) to amend the Fair Credit Reporting Act with 
respect to the applicability of identity theft guidelines to creditors.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                                S. 3987

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Red Flag Program 
     Clarification Act of 2010''.

     SEC. 2. SCOPE OF CERTAIN CREDITOR REQUIREMENTS.

       (a) Amendment to FCRA.--Section 615(e) of the Fair Credit 
     Reporting Act (15 U.S.C. 1681m(e)) is amended by adding at 
     the end the following:
       ``(4) Definitions.--As used in this subsection, the term 
     `creditor'--
       ``(A) means a creditor, as defined in section 702 of the 
     Equal Credit Opportunity Act (15 U.S.C. 1691a), that 
     regularly and in the ordinary course of business--
       ``(i) obtains or uses consumer reports, directly or 
     indirectly, in connection with a credit transaction;
       ``(ii) furnishes information to consumer reporting 
     agencies, as described in section 623, in connection with a 
     credit transaction; or
       ``(iii) advances funds to or on behalf of a person, based 
     on an obligation of the person to repay the funds or 
     repayable from specific property pledged by or on behalf of 
     the person;
       ``(B) does not include a creditor described in subparagraph 
     (A)(iii) that advances funds on behalf of a person for 
     expenses incidental to a service provided by the creditor to 
     that person; and
       ``(C) includes any other type of creditor, as defined in 
     that section 702, as the agency described in paragraph (1) 
     having authority over that creditor may determine appropriate 
     by rule promulgated by that agency, based on a determination 
     that such creditor offers or maintains accounts that are 
     subject to a reasonably foreseeable risk of identity 
     theft.''.
       (b) Effective Date.--The amendment made by this section 
     shall become effective on the date of enactment of this Act.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from New 
Jersey (Mr. Adler) and the gentleman from Idaho (Mr. Simpson) each will 
control 20 minutes.
  The Chair recognizes the gentleman from New Jersey.


                             General Leave

  Mr. ADLER of New Jersey. Mr. Speaker, I ask unanimous consent that 
all Members may have 5 legislative days in which to revise and extend 
their remarks and to insert extraneous material thereon.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from New Jersey?
  There was no objection.
  Mr. ADLER of New Jersey. Mr. Speaker, I yield myself such time as I 
may consume.
  I rise today in support of the Red Flag Program Clarification Act of 
2010. This legislation, which I introduced in the House, will narrow 
the scope of the Fair and Accurate Credit Transaction Act of 2003.
  The FACT Act directed the Federal Trade Commission to promulgate 
rules requiring creditors to implement programs to detect and respond 
to so-called red flags that could indicate identity theft. Clearly, we 
all agree that identity theft is a serious problem and we must respond 
with strong regulations to protect consumers. That was the intent of 
the Congress in 2003. This Congress shares that intent.
  However, we need to be careful that the laws we pass address the 
problem and do so in a way that doesn't adversely and unfairly impact 
small businesses. America's small businesses are struggling in today's 
tough economy. Congress needs to work in a bipartisan manner to find 
commonsense solutions to help America's small businesses remain as 
competitive as possible so they can create good-paying jobs.
  I am pleased the House is taking up my legislation that will reduce 
burdensome regulations on small businesses. The purpose of the Red Flag 
Program Clarification Act is to limit the type of creditor that must be 
covered by the FTC's Red Flags Rule.
  When I think of the word ``creditor,'' dentists, accounting firms, 
and law firms do not come to mind. However, the FACT Act, as read by 
the FTC, states that these professions and others will be required to 
comply with Red Flag's regulations. It is clear when Congress wrote the 
law, they never contemplated including these types of businesses within 
the broad scope of that law. The FTC, to its great credit, has already 
delayed implementation of the Red Flags Rule numerous times because of 
this issue. And I want to thank FTC Chairman Jon Leibowitz for his 
understanding that Congress in no way intended back in 2003 to include 
these sorts of businesses in the broad scope of the FACT Act.
  We must act by the end of this year to head off the potentially 
damaging impact of this rule, and I am pleased this bill, this 
bipartisan bill, will provide a permanent solution to this problem. The 
Senate passed this bill unanimously. The House passed similar 
legislation, which I co-wrote with Mr. Broun and Mr. Simpson, last year 
by a narrow vote of 400-0.
  I want to thank my colleagues, particularly Congressman Broun and 
Congressman Simpson, along with Mr. Maffei and Mr. Lee, for their 
leadership on this issue. I also wish to thank, once again, Chairman 
Frank and Ranking Member Bachus for allowing this bill to come to the 
floor. We worked together on a bipartisan basis to solve a problem. 
Today we achieve a worthy balance the right way, a bipartisan solution 
to a nonpartisan problem.
  Mr. Speaker, I urge passage of this legislation that is so important 
to our small businesses.
  I reserve the balance of my time.
  Mr. SIMPSON. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise today in support of S. 3987, the Red Flag Program 
Clarification Act of 2010. This bill, as was mentioned, is a 
bipartisan, commonsense approach to protecting our Nation's small 
businesses from needless, burdensome government regulations. This 
legislation clarifies the definition of ``creditor'' for the purposes 
of complying with the Red Flags Rule. Under this law, a creditor would 
include only those entities that regularly use consumer reports or 
furnish information to consumer reporting agencies.
  Mr. Speaker, our doctors and dentists across the country are not 
financial institutions, do not present an identity theft risk, and 
should not be treated as such. Under the old rule, many of these 
medical and dental offices were considered creditors because they 
worked with patients to develop payment plans that they could afford. 
This rule actually discourages efforts to improve access to care for 
people who can't afford to pay. This goes against all of our efforts to 
improve our health care system. Congress never meant for small 
businesses such as doctors, dentists, accountants, and others to be 
included in this definition.
  This legislation is a good compromise in addressing the concerns of 
impacted businesses and health care providers while still protecting 
individuals from the risk of identity theft.
  I would like to thank my good friends, Congressman Adler and 
Congressman Broun. I have enjoyed working with you on this legislation. 
I would like to recognize the work of Chairman Frank and Ranking Member 
Bachus to craft a balanced bill that addresses everyone's concerns, as 
well as Senator Begich and Senator Thune for their work on this issue. 
Finally, I would like to thank the FTC chairman, Chairman Leibowitz, 
for working with us so diligently on this issue throughout this rather 
long and arduous process.
  I yield back the balance of my time.
  Mr. ADLER of New Jersey. Mr. Speaker, the gentleman from Idaho (Mr. 
Simpson) and I agree. We agree on lots of things. And we also agree, I 
think, that this Chamber should see more bills like this, more 
processes like this.

                              {time}  1630

  The House and Senate actually cooperated and got something good done 
that helps our small businesses, that helps Americans all across this 
country and that brings a little bit of common sense.
  A few years ago, Congress tried to do a good thing and overreached 
just a little bit with good intent over each little bit. As Mr. Simpson 
acknowledged, we saw the problem. Chairman Leibowitz of the FTC also 
saw the problem, and we worked together. The bureaucracy was not 
inflexible. It showed some restraint and didn't impose an additional 
burden on small businesses--on the doctors and dentists and lawyers

[[Page H8060]]

around the country, who are clearly not creditors. So, for once, the 
process kind of worked.
  This gives hope to the people who will be serving in the next 
Congress. They can work together on a bipartisan basis. This gives hope 
to people like me, who are leaving at the end of this term, that 
Congress will continue to function, in some way, in a bipartisan, 
commonsense manner.
  I am satisfied we've done a good job here.
  Mr. BROUN of Georgia. Mr. Speaker, I strongly support S. 3987, the 
Red Flag Program Clarification Act of 2010, which will remove a 
regulatory burden that our nation's small businesses are facing. I 
would like to thank Chairman Frank and Ranking Member Bachus for 
bringing this bill to the floor, and I thank the Committee staff for 
their hard work.
  In November of 2007, the Federal Trade Commission issued a 
regulation, known as the ``Red Flags'' rule, as required by section 114 
of the Fair and Accurate Credit Transaction Act of 2003. Red Flags 
required financial regulatory agencies, including the FTC, to craft 
rules requiring financial institutions and creditors to implement 
programs to detect and respond to patterns, practices, or specific 
activities--in other words, ``Red Flags''--that could lead to potential 
identity theft.
  The FTC broadly interpreted ``creditors'' to include any business 
that allows clients to establish a payment plan in exchange for their 
services rendered, sweeping in many businesses that do not operate as a 
creditor in the general understanding of the term, such as dentists, 
doctors, veterinarians, lawyers, accountants, and many other health 
care providers that offer their clients payment plans.
  Congress did not intend to have the Red Flags rule cover these types 
of small businesses when it passed the Fair and Accurate Credit 
Transaction Act of 2003. Because of the uncertainty as to the 
definition of a creditor and subsequent law suits filed against the 
FTC, the FTC delayed enforcement of the Red Flags Rule multiple times 
since its original implementation date of January 1, 2008. The Rule is 
now scheduled to go into effect on January 1, 2011, and if it does, it 
could require small businesses to undertake costly and burdensome 
measures to prevent identity theft in industries that pose little 
threat. This legislation will eliminate the need to request another 
enforcement delay.
  It also clarifies who must comply with the Red Flags Rule as those 
creditors that use consumer reports, furnish information to consumer 
reporting agencies, and other creditors that loan money. Should it 
become apparent that there are industries that present a reasonably 
foreseeable risk of identity theft, the FTC will have the authority to 
issue a rule open for public comment that shows the industry should 
comply with the Reds Flag rule.
  This legislation has broad bipartisan support. It passed the Senate 
by unanimous consent last week, and similar legislation I cosponsored 
passed the House last fall on the Suspension calendar with a 400-0 
vote. It is supported by over 30 medical associations and the U.S. 
Chamber of Commerce.
  In its initial regulatory analysis, the FTC estimated that the 
proposed Red Flags regulation would cover approximately 11.1 million 
entities ``across almost every industry,'' ninety percent of which were 
expected to qualify as small businesses. At a time when we are 
experiencing record high unemployment, Congress needs to provide our 
nation's job creators relief from unnecessary regulations. This 
legislation will do just that.
  I urge my colleagues to support this bill, so that we can ease the 
regulatory burden on those industries that were not supposed to be 
covered by the Red Flags rule.
  Mr. ADLER of New Jersey. I yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from New Jersey (Mr. Adler) that the House suspend the rules 
and pass the bill, S. 3987.
  The question was taken; and (two-thirds being in the affirmative) the 
rules were suspended and the bill was passed.
  A motion to reconsider was laid on the table.

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