Republic Bancorp in Kentucky Exiting Tax Refund Lending
The FDIC has upped the ante in its push to force Republic Bank to stop making refund-anticipation loans, amending a notice of charges against the bank to include new violations.May 5
Republic Bancorp Inc. in Louisville, Ky., is packing up its refund-anticipation loan product after the upcoming tax season.
The $3.1 billion-asset company said in a regulatory filing Friday that it has settled its months-long battle with the Federal Deposit Insurance Corp. over the controversial product.
Republic agreed to terminate the product after the 2012 tax season, while the FDIC agreed to terminate a 2009 cease-and-desist order on the bank involving the RAL business. The regulator and the bank also developed a plan for better oversight of the tax preparers. A pending civil money penalty of $2 million was reduced to $900,000.
The FDIC has been aggressively trying to force Republic's bank out of the business since last year, when the Internal Revenue Service said it would stop providing lenders with details about prior claims on refund loans.
In February, the FDIC issued the bank a notice of charges stating that the product was unsafe and unsound since the debt indicator would no longer be available. Republic vowed to fight for its ability to continue to offer the product, which accounted for 35% of the $69 million the company made on its tax business so far this year.
Weeks later, Republic sued the FDIC in federal court after the FDIC staged an impromptu examination of hundreds of the bank's tax preparation partners across the country. The FDIC also upped the ante on the notice of charges by claiming the bank violated laws such as the Truth-In-Lending Act, because the preparers did not state the fee as an annual percentage rate.
Steve Trager, Republic's president and chief executive, had repeatedly defended the loans, stating as recently as this summer that the company would stick with the program.
Republic also agreed to drop its litigation as part of this week's settlement.