Federal Issues

    FTC Rulemaking on Identity Theft “Red Flags” 

    CPAs and CPA firms were officially exempted from the FTC’s Red Flags rule with the passage of S.3987, the “Red Flag Program Clarification Act of 2010” in December 2010. 

    On May 28, 2010, the Federal Trade Commission announced it was again delaying implementation until December 31, 2010 of a proposed Final Rule relating to Identity Theft Red Flags under the Fair and Accurate Credit Transactions Act of 2003. The proposed “Red Flags” rule is designed to help prevent identity theft among credit providers and financial institutions. However, it would cover any CPA who bills clients for services rendered. The AICPA requested that the FTC exempt CPAs from the regulation and filed a suit in federal court seeking a bar against application of the FTC rule to CPAs and accounting firms.

    Application of the FTC’s Red Flags rule to CPAs would be onerous and burdensome because it would require accountants, who are already trusted advisers to their clients and adhere to strict privacy requirements, to develop and implement a written identity theft prevention program in accordance with FTC mandates. The AICPA does not believe there is any reasonably foreseeable risk of identity theft when CPA clients are billed for services rendered.

    Responding to the increase in identity theft, Congress passed the Fair and Accurate Credit Transactions Act of 2003 (FACTA), amending the Fair Credit Reporting Act (FCRA). Among the many provisions in FACTA was a mandate that the FTC, federal bank regulatory agencies, and the National Credit Union Administration jointly develop rules and guidelines for financial institutions and creditors regarding identity theft. Final rules and guidelines were issued jointly in 2007 requiring, among other things, that each “financial institution” or “creditor” develop and implement a written Identity Theft Prevention Program to detect, prevent, and mitigate identity theft in connection with certain accounts. Elements of the program are tied to the identification and detection of “Red Flags,” which are defined as “a pattern, practice, or specific activity that indicates the possible existence of identity theft.”

    Representative John Adler, a New Jersey Democrat, introduced legislation last year (H.R. 3763) that would free accountants, lawyers and health care providers from Red Flags Rule compliance if their practice has 20 or fewer employees. The bill passed the House unanimously on a vote of 400-0. As the legislation made its way to the Senate for consideration, the U.S. District Court for the District of Columbia ruled in favor of the American Bar Association that the FTC could not apply the Red Flags Rule to lawyers. Because accountants are similarly situated to lawyers in regards to being considered a “creditor” under the FTC interpretation of FACTA, the AICPA also filed a lawsuit against the FTC on November 10, 2009. Earlier in the year, the District Court for the District of Columbia granted a delay of enforcement of the rule for public accounting members of the AICPA for ninety days after an opinion comes down from the Court of Appeals on the similar case brought by the American Bar Association.

    On November 15, 2010 the Court of Appeals heard oral arguments in the American Bar Association v. FTC lawsuit.  In response, to the oral arguments, Senator John Thune, a South Dakota Republican and Senator Mark Begich, an Alaska Democrat, introduced S. 3987, the “Red Flag Program Clarification Act of 2010” to make clear that professionals, like CPAs and CPA firms, are not classified as “creditors” for the purposes of the Red Flags Rule. Senator Thune further clarified the intent of the legislation in his floor statement by stating,“So, for example, an accountant would not become a creditor simply for obtaining a consumer report--with the permission of any consumer whose report is obtained--in order to examine the integrity of a company's management.” The bill passed the Senate without amendment by unanimous consent on November 30, 2010 and was agreed to by voice vote in the House of Representatives on December 7, 2010.  S. 3987 was then signed into law by President Obama on December 18, 2010.


    Copy of Legislation

    Copies of S. 3987 and H.R. 3763 are available on the Library of Congress's THOMAS website.  All versions of the bills, and all Congressional actions, are available by using the advanced search function and searching for S. 3987 and H.R. 3763 by bill number under the 111th Congress.

    Member Floor Statements during Consideration of S. 3987

    December 7, 2010, House Floor Statements by Representatives John Adler, a New Jersey Democrat, Mike Simpson, an Idaho Republican, and Paul Broun, a Georgia Republican.

    November 30, 2010 Senate Floor Statements by Senators John Thune, a South Dakota Republican, Chris Dodd, a Connecticut Democrat, and Mark Begich, an Alaska Democrat.

    AICPA Letters and Other Actions

    November 10, 2009 AICPA Complaint Requesting Relief from FTC Red Flags Rule

    October 20, 3009 AICPA Letter to the FTC requesting a delay in its Red Flags Rule enforcement as a result of decision in the American Bar Association lawsuit.

    October 15, 2009 AICPA Letter to Representative Adler applauding his recognition that the FTC overstepped its authority as well as requesting a lifting of the cap from exclusion of the rule to ensure a full CPA exemption.

    August 4, 2009 AICPA Letter to the FTC applauding the delay of the Red Flags Rule and requesting a full CPA exemption from the rule.

    Staff Contact

    Matthew Iandoli
    Director, Congressional Affairs

    Open Hide documents in this section

    Page  1 2 3 4 5 >> 
    Showing results 1 - 15 of 109
    Order by:

    Congressional and Political Affairs Advocacy

    Overview The AICPA monitors and advocates on legislative and other matters that affect the accounting profession. Working with state CPA societies and other professional organizations, the AICPA provides information to and educates federal, state and local policymakers regarding key issues.
    Published on February 05, 2015


    Overview Extensible Business Reporting Language (XBRL) used in financial and other reporting allows for easier access to more transparent information.  AICPA supports legislative proposals to utilize XBRL by companies, Federal agencies and recipients of Federal funds.
    Published on December 15, 2014

    AICPA Letter to House Oversight and Government Reform Committee re DATA Act Implementation Hearing

    Legislative Letters The AICPA wrote to the House Oversight and Government Reform Committee regarding the Committee's hearing entitled "Transforming Federal Spending: Implementing the Digital Accountability and Transparency Act."
    Published on December 15, 2014

    Federal Legislative and Regulatory Issues

    Federal Law This page highlights the advocacy issues in which the Congressional & Political Affairs Team is advocating on behalf of the profession, and also those issues that the team has recently followed.
    Published on October 28, 2014

    Accounting Partnership Retirement Practices

    Article In letters to members of the Equal Employment Opportunity Commission (EEOC), the American Institute of CPAs (AICPA) has asked commissioners to reject staff appeals to investigate and litigate against accounting firms regarding partner retirement provisions
    Published on October 21, 2014

    Preserving the Cash Basis Method of Accounting for CPA Firms

    Article The AICPA is opposed to certain provisions included in tax reform proposals that would limit the availability of the cash basis method of accounting.
    Published on September 29, 2014

    Cash Accounting Bipartisan Letter to the House of Representatives

    Legislative Letters
    Published on September 11, 2014

    Cash Accounting Senate Letter

    Legislative Letters
    Published on August 07, 2014

    Camp Letter On Cash Basis April 25, 2014

    Legislative Letters The American Institute of CPAs (AICPA) voices strong opposition to draft legislation that would limit the use of the cash method of accounting for pass-through entities and personal service corporations.
    Published on May 08, 2014

    Convergence of International and US Accounting Principles and IFRS

    Article International Financial Reporting Standards (IFRS) set by the International Accounting Standards Board (IASB) in London is a response to worldwide demand from regulators, investors, businesses, and auditing firms for a single set of high-quality, globally-accepted accounting standards.
    Published on April 17, 2014

    AICPA Letter to SEC on Proposed Regulation Crowdfunding

    Comment Letter AICPA comments on the SEC's proposed new Regulation Crowdfunding under the Securities Act of 1933 and the Securities Exchange Act of 1934 to implement the requirements of Title III of the JOBS Act as published in SEC File No. S7-09-13.
    Published on February 06, 2014

    Jan 2014 - AICPA Statement for the Record regarding Conferences and Travel

    Article AICPA provided a Statement for the Record to the Senate Homeland Security and Government Affairs Committee in  response  to the hearing held on January 14, 2014 entitled, "Examining Conference and Travel Spending Across the Federal Government."
    Published on January 28, 2014

    Cash Basis Letter to Senate Finance Committee from Associations-Jan7-2014

    Legislative Letters Cash Basis Letter to Senate Finance Committee dated Jaunary 7, 2014 from American Council of Engineering Companies, American Dental Association, American Farm Bureau Federation, American Institute of Architects, American Institute of CPAs and S Corporation Association.
    Published on January 22, 2014

    Municipal Advisors

    Issue Brief The AICPA generally supports the SEC’s proposed rules as a means to strengthen investor protections in the municipal securities market.  The AICPA is concerned, however, because the proposed rule would require that accountants performing customary and usual accounting services would be required to register as municipal advisors.
    Published on January 07, 2014

    ERISA Fiduciary Definition - Appraisers of Employee Stock Ownership Plans

    Article The AICPA believes that the U.S. DOL should implement rules that would require appraisers of ESOPs to meet minimum qualification requirements, including holding relevant credentials and training, and comply with applicable professional valuation standards.
    Published on December 30, 2013

    Page  1 2 3 4 5 >> 
    Showing results 1 – 15 of 109
    Show Results per page
    Copyright © 2006-2015 American Institute of CPAs.