The issue began when the Internal Revenue Service declined to provide the direct deposit debt indicator for the 2011 tax season. The FDIC declared that loaning money with the debt indicator represented an unsafe banking practice. Republic Bank said it had tightened its underwriting criteria and said that as of May 5 that only 1.61 percent of its RALs remain unpaid. "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," the bank said in a prepared statement.

Examiners were sent to electronic return originators and the FDIC faulted these with overwhelmingly note quoting the annual percentage rate in telephone calls in which they were quizzed on the cost of RALs. EROs also frequently did not have truth-in-lending disclosures in consumer files. The FDIC also said EROs were discriminating based on marital status when they declined to issue RALs to taxpayers who were married and filing jointly when one of the spouses did not want a RAL.

The bank had also been under a cease and desist order on Feb. 27, 2009 in which it was supposed to development and implement a compliance management system. The agency concluded Republic can't manage and control third-party risks and cited a "a deficient training program; inadequate security for customer information and cash equivalents, including debit cards, inadequate computer safeguards, and EROs' failure to comply with law and regulation ... "

The FDIC faulted Republic for sending a link to a frequently asked question page because of anticipated examiner visits. According to the agency report, " The FAQs would not have been needed if the Bank's training was adequate." And the FDIC claimed the issuance of the FAQs interfered with its ability to get "true and candid answers" during its review of practices.

The finding alleged violation of the Gramm-Leach-Bliley Act and FDIC regulation in not providing adequate protection of ERO premises and the report faulted tham for not maintaining shredders, shred bins, or locked dumpsters for secured disposal of confidential consumer information.