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Red Flags Rule

Law Exempts Dentistry from Red Flags Rule

The president in December signed into law a bill that exempts dental practices and other small businesses from the Federal Trade Commission's (FTC) Red Flags Rule.

Passage of the bill culminates a long and sustained effort by the ADA to free dental practices from burdensome identity theft regulations. The legislation that was passed by the Senate and the House may save dental practices hundreds of dollars in implementation costs. In fact, the ADA estimates the nationwide savings associated with this exemption to be $72 million.

The FTC issued the rule in 2007 implementing a requirement of the Fair and Accurate Credit Transactions (FACT) Act of 2003. The act requires financial institutions and creditors to develop and implement a written identity theft program. Although neither the FACT Act nor the final rule issued by the FTC specifically mention dentists or other health care professionals as creditors, the FTC nevertheless determined that dentists and other health care professionals should comply and implement a Red Flags program or face substantial penalties.

The ADA and others argued that the act was meant to apply to large loan and financial institutions and not to small practices that accepted credit cards to facilitate payment for services and were not in the business of making loans. In fact, when the House of Representatives considered Red Flags legislation in 2009, the American Dental Political Action Committee (ADPAC) mobilized its grassroots members, more than 15,000 of whom contacted their lawmakers, helping drive a unanimous House to vote of 400 to 0 in favor of exempting small businesses from the rule. It took time for the Senate to act, but when it did in November 2010, the House voted to accept the Senate bill to expedite matters before the FTC delay on rule enforcement expired.