WASHINGTON - The American Bar Association filed suit Thursday, asking the U.S. District Court for the District of Columbia to bar the Federal Trade Commission from applying its Red Flags Rule, designed to prevent identity theft, to practicing lawyers.

"Because the FTC is exceeding the powers delegated to it by Congress and misinterpreting the Rule, the ABA is seeking declaratory and injunctive relief in advance of pending FTC Rule enforcement on Nov 1, 2009," the 400,000-member ABA said in a press release announcing the move.

The ABA complaint, prepared on a pro bono basis by Proskauer Rose LLP, states that the application of the rule to practicing lawyers is "arbitrary, capricious and contrary to law," and that the FTC has failed "to articulate, among other things: a rational connection between the practice of law and identity theft; an explanation of how the manner in which lawyers bill their clients can be considered an extension of credit under the FACTA; or any legally supportable basis for application of the Red Flags Rule to lawyers engaged in the practice of law."

The rule makes creditors responsible for detecting and responding to activity that signals possible identity theft. "The FTC's original enforcement policy in October 2008 and subsequent updates provided no indication that lawyers engaged in the practice of law fell within the definition of ‘creditor,' " the ABA said in its release. "Only after implementation of the rule was delayed again in April 2009 - just one day before the expiration of an initial six-month extension - did the FTC publicly announce its position that lawyers were subject to the rule."

"Congress did not intend to cover lawyers under the rule," ABA President Carolyn Lamm said in a prepared statement. "The FTC's decision to apply the rule to lawyers is contrary to an unbroken history of state regulation of lawyers and intrudes on traditional state responsibilities. The rule requires extensive reporting and bureaucratic compliance that would unnecessarily increase the cost of legal services. This kind of unauthorized and unjustified federal regulation of law practice threatens the independence of the profession and the lawyer's role as client confidante and advocate."

A copy of the complaint is available at abanet.org/media/nosearch/1_1_complaint.pdf.