FDIC Orders Bank to Modify RAL Program

Republic Bank & Trust Co. has consented to the issuance of a cease and desist order with the FDIC for its refund anticipation loan (RAL) program. The order gives the bank 120 days to establish an adequate compliance management system for its RAL program and sets various deadlines of up to 120 days for the bank to make other changes specified in the order to the program.

Although the bank agreed to the issuance of the order, it has not admitted or denied the charges of unsafe or unsound banking practices or violations of law or regulations alleged by the FDIC.

Republic is a national provider of RALs, electronic refund checks, and electronic refund deposits, which are offered to taxpayers and facilitated through tax return preparers, dubbed “electronic refund originators” (EROs). EROs are paid $6 per RAL, according to the bank’s Web site.

The cease and desist order says Republic failed to establish policies and practices that would ensure compliance with federal consumer protection laws, but did not specify the bank’s violations. The order did say that the bank’s compliance management system is inadequate given its size as a third-party RAL provider and that the FDIC had reason to believe the bank had engaged in “unsafe or unsound banking practices.”

The FDIC will require the bank to ensure that EROs receive comprehensive training in the applicable consumer lending laws. The FDIC is also requiring the bank to submit a plan for its RAL business that will “appropriately assess, measure, monitor, and control third party risk, and ensure compliance with Consumer Law.”