As a therapist in private practice, would you consider yourself a creditor if you allow clients to delay a payment or two from time to time?
The answer was unclear, at least from the viewpoint of the Federal Trade Commission (FTC) which implemented a “Red Flags Rule” in 2007 that required any professional who extended credit to develop an identity theft protection program.
Health care providers, including the American Medical Association (AMA) and mental health provider associations, have sought exemption from the policy since then, mainly due to the expense and complexity of setting up an identity theft prevention program.
Obviously, many providers simply turned a blind eye to the FTC regulation while the government itself struggled to define who was covered and who was not.
But the issue has apparently been settled after President Obama signed the “Red Flag Program Clarification Act” on December 18. It exempts most physicians, psychologists, licensed clinical social workers and other health care providers from the requirement.
The new law “limits those covered by the Red Flag Rules to anyone who uses consumer financial reports, provides information to consumer reporting agencies, or advances actual funds toward repayment of a bill,” says a December 29 report from the Clinical Social Work Association.
“While this may apply to a very small group of LCSWs who fall into the above categories, it is a miniscule number compared to the thousands of LCSWs that were originally required to comply with Red Flag Rules, just because they were paid through insurance or billed on a monthly or other delayed basis.”
For a more in-depth look at the issue, see this analysis by the law firm McDermott, Will & Emery forwarded to us by Laura Groshong, director of government relations for the CSWA.
Another viewpoint is available from the AMA, which filed a lawsuit in May requesting physician exemption from the requirement.
It describes in further detail who will qualify as a creditor under the newly clarified law.