Docs drop suit after court ruling on creditors

The American Medical Association (AMA) announced Monday that it has dropped its lawsuit against the Federal Trade Commission (FTC) after a federal appeals court ruled that doctors aren't creditors.

The D.C. court of appeals ruled Friday that professionals who allow customers to pay after the delivery of services don't automatically qualify as creditors. The FTC had argued that doctors and others should comply with "red flag" rules requiring creditors to track and prevent identity theft under a 2003 law, but Congress passed a clarification act last year to exempt doctors, lawyers and others from the law's costly requirements.

"The Clarification Act makes it plain that the granting of a right to 'purchase property or services and defer payment therefore' is no longer enough to make a person or firm subject to the FTC's red flags rule – there must now be an explicit advancement of funds," Senior Circuit Judge Harry Edwards ruled. "In other words, the FTC's assertion that the term 'creditor' ... includes 'all entities that regularly permit deferred payments for goods or services,' including professionals 'such as lawyers or health care providers, who bill their clients after services are rendered,'… is no longer viable."

The AMA filed a "friend of the court" brief in that lawsuit, which was brought by the American Bar Association. The association announced Monday that a separate lawsuit, brought by the AMA, the American Osteopathic Association and the Medical Society of the District of Columbia and joined by 26 national medical specialty societies, "will now formally end."

"The court's decision reinforces the intent of a new law clarifying the scope of the red flag rule and helps eliminate any further confusion about the rule's application to physicians," AMA President Cecil Wilson said in a statement. "The AMA will remain vigilant that the FTC respects the meaning and intent of the Clarification Act."