Some small business owners, including many lawyers, accountants, and healthcare providers, got just the holiday gift they've been hoping for: Relief from complying with a broadly written rule that would've required them to implement a detailed written program to prevent and detect red flags that might indicate identity theft.

The Red Flag Program Clarification Act, which narrows the scope of the definition of “creditor” under the Red Flags rule, relieving many businesses, including lawyers, accountants, and many healthcare providers, from compliance, is headed to the president's desk to be signed into law. The House passed the bill in a Dec. 7 voice vote, following its passage by the Senate on Nov. 30.

The Red Flags Rule, created under the Fair and Accurate Credit Transition Act, originally included a broad definition of the term “creditor” as any person that sells a product or service for which the consumer can pay later, which would've forced many small businesses that offered payment plans to their clients to comply with the detailed identity theft prevention requirements.

Debate over the types of businesses intended to be subject to the rule's requirements caused the Federal Trade Commission to delay its enforcement several times, and spurred numerous lawsuits fighting its application to certain professionals by groups such as the American Bar Association, the American Institute of Certified Public Accountants, and the American Medical Association.

“We're pleased Congress clarified its law, which was clearly over-broad,” FTC Chairman Jon Leibowitz said in a statement. “Now, we can go forward with less litigating and more protecting consumers from identity theft.”

Under the legislation, lawyers, doctors, accountants, and healthcare and other service providers won't be classified as “creditors” just because they don't receive payment in full from clients at the time they provide their services, if they don't offer or maintain accounts that pose a reasonably foreseeable risk of identity theft.

The rule will only cover a “creditor” that regularly and in the ordinary course of its business obtains or uses consumer reports in connection with a credit transaction, furnishes information to consumer reporting agencies in connection with a credit transaction, or loans money.

In a statement, ABA president Stephen Zack lauded the passage of the bill as “clear and final relief from attempts to solve a non-existent problem that would have created paper-pushing and raised legal costs.”