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Friday, December 9, 2011

The End of the RAL

We may be seeing the last of the Refund Anticipation Loans (RALs) as we know them.

In an 8-K filing this morning, Republic Bank, which was the "Last Man Standing" in the RAL market, announced that the bank and the FDIC had settled their suit.  Some of the key points of the settlement are:
  • RALs will cease by April 30th, 2012 – and Republic will not offer them after that.
  • Republic Bank will pay a $900,000 civil penalty (reduced from $2 million).
  • Republic Bank will institute an ERO oversight plan.
  • Republic Bank can continue to do RACs in the future.
  • Republic Bank will drop their suit against the FDIC.
Some of the points of the Republic's ERO oversight are:
  • Annually audit 10% of EROs for compliance (laws, processes, procedures, disclosure, physical and electronic security).
  • Audits will consist of onsite visits, document reviews, nystery shops of tax prep offices, and tax product customer surveys.
  • Advertising approval process for Bank to approve all Tax Preparer advertisements PRIOR to publications.
  • Monitoring of EROs for income tax return quality.
  • Monitoring of EROs for adherence to acceptable tax prep fees.
  • (and other requirements).
Drake Tax Software will continue to support Republic Bank and its RAL efforts this tax season.
Here is Republic's 8-K filing in PDF format if you would like to review it.