The Progressive Accountant - Tax
Republic Accrues for RAL Penalty E-mail
Written by The Progressive Accountant   
Friday, 22 July 2011 18:48

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Republic BankRepublic Bancorp has taken $2 million charge for a penalty it may have to pay because of its refund loan business. That meant the company's Tax Refund Solutions business had net income of $1.3 million for the second quarter ended June 30, a sharp drop from $3.1 million in last year's corresponding period.

The $2 million non-tax deductible accrual would cover a civil monelty penalty proposed by the Federal Deposit Insurance Corp. against company's subsidiary, Republic Bank & Trust. The FDIC alleges the bank engaged in unsound banking practices by operating a refund anticipation loan program after the Internal Revenue Service stopped providing the debt indicator, which shows if a RAL application has obligations that might be withheld from a 1040 refund. Republic is contesting the claim and a hearing is set before an administrative law judge on February 6.

 

On the other side, the company recorded a net credit of $2 million to its provision for loan losses during the second quarter, compared to a $1 million credit a year earlier. The credits reflect better than projected losses on RALs, in part because it cut the amount it loaned by two thirds from 2010 to 2011.



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