FDIC proposes $2 million fine over Kentucky bank's short-term loan practices

The Federal Deposit Insurance Corporation is fining Republic Bank & Trust Company $2 million over its tax refund loan business, according to the Louisville Courier-Journal. For the past 16 years, Republic has made short-term loans of $1,500 to customers, based on their anticipated tax refunds. Customers typically pay $60 for the loan itself, and an additional $30 for the electronic processing of the refund to their bank accounts. The FDIC proposed a $2 million penalty against the bank over the practice, and Republic sued a month later on the grounds of being unfairly targeted. Additionally, the bank allegedly coached its tax preparers on how to best answer questions that were likely to be asked by regulators. "The concerns expressed by the FDIC with regard to the bank’s underwriting of financial risk on RALs during this tax season, we believe, were proven to be unfounded in light of our performance," said the filing, as quoted by Business First. The FDIC reported that the bank made 836,835 loans for more than $3 billion during the 2010 tax season - a figure that is roughly equal to the average assets of the bank.