Today, the House of Representatives passed S. 3987, the Red Flag Program Clarification Act of 2010. In October 2009, Idaho Congressman Mike Simpson, Congressman John Adler (D-NJ), and Congressman Paul Broun (R-GA) introduced and passed similar legislation, HR 3763, which would protect small businesses and small health care practices from complying with a burdensome and unnecessary federal regulation known as the Red Flags Rule. This bill then went to the Senate where they passed S. 3987, which clarifies the definition of a creditor for the purposes of complying with the Red Flags Rule. The Red Flags Rule requires financial institutions and creditors to develop and implement a written identity theft program.  Under S. 3987, a creditor would include only those entities that regularly use consumer reports or furnish information to consumer reporting agencies. 

“It is obvious that physicians and dentists are not financial institutions and therefore do not present the same level of risk as financial institutions in cases of identity theft.  The definition of creditor under the Red Flags Rule is overly broad and encompasses far too many businesses that should not be included. Many providers are considered creditors because they don’t require full payment at the time of service—instead they bill the insurance company first, and then they bill the patient the remainder of the bill.  This system should not be treated the same as a loan with a bank,” said Congressman Simpson. “Health care is expensive enough; we don’t need to create needless regulations that will only increase costs even more.”

This bipartisan legislation recognizes that the definition of a creditor under the Red Flags Rule is overall broad and requires businesses that do not pose an identity theft risk to spend hundreds of dollars complying with additional, unnecessary regulations.  Entities such as health providers, accountants and others were never meant to be included in the definition of creditor, and this legislation is an appropriate next step to better defining who is a creditor and should comply while protecting our small businesses from needless costs and regulations. 
 
“I am pleased to see that Congress is going to address this very important issue before the rule takes effect on January 1st,” said Simpson.  “This bill is a good compromise to addressing the concerns of impacted businesses and healthcare providers while still tackling the very real need to protect individuals and groups against the threat of identity theft.” 

This bill passed the House unanimously and will now be sent to the President to be signed into law.
 
To watch a video of Congressman Simpson's floor speech, visit his YouTube website.