Exhibit 10.1  Notice of Charges for an Order to Cease and Desist and Notice of
Hearing

FEDERAL DEPOSIT INSURANCE CORPORATION
 
WASHINGTON, D.C.
 
In the Matter of:
 
REPUBLIC BANK & TRUST COMPANY
LOUISVILLE, KY
NOTICE OF CHARGES FOR AN ORDER TO CEASE
AND DESIST AND NOTICE OF HEARING
    (INSURED STATE NONMEMBER BANK) FDIC-10-079b

 
The Federal Deposit Insurance Corporation ("FDIC"), having reasonable cause to
believe that Republic Bank & Trust Company, Louisville, Kentucky ("Bank"), is
engaging in unsafe or unsound banking practices with respect to its Refund
Anticipation Loan ("RAL") program and, unless restrained, will continue to
engage in such practices and violations in conducting the business of the Bank,
hereby institutes this proceeding for the purpose of determining whether an
appropriate order should be issued against the Bank under the provisions of
section 8(b)(1) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. §
1818(b)(1). The FDIC hereby issues this NOTICE OF CHARGES FOR AN ORDER TO CEASE
AND DESIST AND NOTICE OF HEARING ("Notice"), pursuant to the provisions of the
Act and the FDIC Rules of Practice and Procedure, 12 C.F.R. Part 308:
 
1.   The Bank is a corporation existing and doing business under the laws of the
Commonwealth of Kentucky and has its principal place of business at Louisville,
Kentucky.
 
2.   At all times pertinent to this proceeding, the Bank is and has been a State
nonmember bank within the meaning of section 3(e)(2) of the Act, 12 U.S.C. §
1813(e)(2), an insured depository institution within the meaning of section
3(c)(2) of the Act, 12 U.S.C. § 1813(c)(2), and is subject to the Act, 12 U.S.C.
§§ 1811-1831aa, the Rules and Regulations of the FDIC, 12 C.F.R. Chapter III,
and the laws of the Commonwealth of Kentucky.
 
 
 

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3.   The FDIC has jurisdiction over the Bank and the subject matter of this
proceeding.
 
Refund Anticipation Loan Program
 
Unsafe or Unsound Underwriting Practices
 
4.   A major business line of the Bank is the origination of short term loans to
consumers that are, in substance, secured by the consumers' anticipated income
tax refund, Refund Anticipation Loans ("RAL").
 
5.   During the 2010 tax season the Bank made approximately 836,835 RAL loans
totaling over $3,011,606,947, roughly equal to the average assets of the Bank.
 
6.   The Bank's primary, if not sole, source of repayment for RAL loans is the
borrower's tax refund.
 
7.   One reason the Internal Revenue Service ("IRS") will deny a taxpayers
refund is a debt owed to the IRS or certain others.
 
8.   During previous tax seasons it was possible to obtain from the IRS
information concerning a taxpayer's obligations to the IRS or certain others
which might preclude payment of a tax refund, commonly known as the "debt
indicator" ("DI").
 
9.   The DI was a vital underwriting tool that allowed the Bank to determine
with a reasonable degree of certainty whether a taxpayer will actually receive a
refund.
 
10.         In August of 2010 the IRS announced that it would no longer provide
the DI to third parties including the Bank. The DI provided notification of the
IRS's intention to offset a refund for debts, including federally insured loans,
delinquent child support and federal and state tax liens. If there is no lien on
the refund, the probability of the borrower repaying the loan is considerably
higher for an RAL. Thus, the DI was previously a key underwriting tool for the
RAL portfolio.
 
 
 

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11.        Without the DI, the risk of loss increases and a robust underwriting
risk mitigation process becomes essential. A bank that cannot use a debt
indicator for an RAL must instead underwrite the loans and assess these risks
using a retail credit model similar to that used to determine probability of
default in small unsecured consumer loans, using such factors as income level,
employment, credit score, credit line utilization levels, and payment pattern on
certain recurring bills.
 
12.         Republic's underwriting procedures did not mitigate the absence of
the DI and do not consider data needed to assess risk in an unsecured consumer
loan portfolio. The Bank currently uses a deficient credit underwriting process
that may not have current tax liens and may not appropriately address the
variety of variables necessary to establish default and loss probabilities
during the 2011 tax season.
 
13.         Operating the RAL program without sufficient underwriting or the
benefit of the DI is an unsafe or unsound practice, and subjects the Bank to
abnormal risk of loss.
 
NOTICE OF HEARING
 
Notice is hereby given that a hearing will be held in Louisville, Kentucky,
commencing 60 days from the date of service of the NOTICE, or on such date and
at such place as may be set by the Administrative Law Judge appointed to hear
the matter, for the purpose of taking evidence on the charges specified in the
NOTICE, and to determine whether an appropriate order should be issued under the
FDI Act requiring the Bank to cease and desist from the unsafe or unsound
practices and to take affirmative action to correct the conditions resulting
from such unsafe or unsound practices by immediately exiting the RAL business as
set forth in the attached Order.
 
 
 

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The hearing will be held before an Administrative Law Judge to be appointed by
the Office of Financial Institution Adjudication pursuant to 5 U.S.C. § 3105.
The hearing will be public, and in all respects will be conducted in compliance
with the FDI Act, the Administrative Procedures Act, 5 U.S.C. §§ 551 - 559, and
the FDIC Rules of Practice and Procedure, 12 C.F.R. Part 308.
 
The Bank is directed to file an answer to the NOTICE OF CHARGES FOR AN ORDER TO
CEASE AND DESIST 20 days from the date of service, as provided in 12 C.F.R. §
308.19 of the FDIC Rules of Practice and Procedure.
 
All papers to be filed or served in this proceeding shall be filed with the
Office of Financial Institution Adjudication, 3501 N. Fairfax Drive, Suite
VS-D8113, Arlington, VA 22226-3500, pursuant to section 308.10 of the FDIC Rules
of Practice and Procedure, 12 C.F.R. § 308.10. Respondent is encouraged to file
any answer electronically with the Office of Financial Institution Adjudication
at ofia@fdic.gov.
 
Copies of all papers filed or served in this proceeding shall be served upon the
Office of the Executive Secretary, Federal Deposit Insurance Corporation, 550
17th Street, N.W., Washington, D.C. 20429-9990; A.T. Dill, Assistant General
Counsel, Supervision Branch, Federal Deposit Insurance Corporation, 550 17th
Street, N.W., Washington, D.C. 20429-9990; and Timothy E. Divis, Regional
Counsel, Federal Deposit Insurance Corporation, 300 S. Riverside Drive, Suite
1700, Chicago, Illinois 60606.
 
 
 

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Pursuant to delegated authority.
 
Dated this 9th day of February, 2011.
 
 

 
/s/ Serena L. Owens
     
Division of Supervision and Consumer Protection
 
Federal Deposit Insurance Corporation

 
 
 

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FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C.
 
 
 

         )   In the Matter of   ORDER TO CEASE AND DESIST    )      )   REPUBLIC
BANK & TRUST COMPANY  )   LOUISVILLE, KENTUCKY  ) FDIC-10-079b    )      )  
(STATE CHARTERED  )   INSURED NONMEMBER BANK)  )      )  

 

IT IS HEREBY ORDERED, that Republic Bank& Trust Company, Louisville, Kentucky
("Bank"), its institution-affiliated parties, as that term is defined in section
3(u) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. § 1813(u), and its
successors and assigns, take affirmative action as follows:
 
1.                 (a)  From the effective date of this ORDER, the Bank shall
cease making Refund Anticipation Loans ("RAL") and shall implement a plan to
wind down the RAL operation.
 
(b)  The plan required by this paragraph shall be acceptable to the Regional
Director of the FDIC's Chicago Region ("Regional Director").
 
 
 

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2.                 Following the effective date of this ORDER, the Bank shall
send to its shareholder a copy of this ORDER.
 
This ORDER shall be effective upon its issuance by the FDIC.
 
The provisions of this ORDER shall be binding upon the Bank, its
institution-affiliated parties, and any successors and assigns thereof.
 
The provisions of this ORDER shall remain effective and enforceable except to
the extent that, and until such time as, any provision has been modified,
terminated, suspended, or set aside by the FDIC.
 
SO ORDERED by the Board of Directors at Washington D.C., this _____ day of
___________, 2011.
 

 
By:
 
_____________________________
Robert E. Feldman
Executive Secretary
Federal Deposit Insurance Corporation