EXHIBIT 10.62


 


FEDERAL
DEPOSIT INSURANCE CORPORATION


 


WASHINGTON,
D.C.


 




	
   

  	
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  In the Matter of

  	
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  REPUBLIC BANK &
  TRUST COMPANY

  	
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  ORDER TO CEASE AND DESIST

  
	 
	
  LOUISVILLE, KENTUCKY,

  	
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  FDIC-08-308b

  
	 
	
  (Insured State Nonmember
  Bank)

  	
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Republic Bank &
Trust Company, Louisville, Kentucky (“Bank”), having been advised of its right
to a NOTICE OF CHARGES AND OF HEARING detailing the unsafe or unsound banking
practices and violations of law or regulation alleged to have been committed by
the Bank, and of its right to a hearing on the charges under
section 8(b) of the Federal Deposit Insurance Act (“Act”), 12 U.S.C.
§ 1818(b), and having waived those rights, entered into a STIPULATION AND
CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST (“CONSENT AGREEMENT”)
with counsel for the Federal Deposit Insurance Corporation (“FDIC”), dated
February 20, 2009, whereby, solely for the purpose of this proceeding and
without admitting or denying the charges of unsafe or unsound banking practices
and violations of law or regulation, the Bank consented to the issuance of an
ORDER TO CEASE AND DESIST (“ORDER”) by the FDIC.


 


The FDIC considered the
matter and determined that it had reason to believe that the Bank had engaged
in unsafe or unsound banking practices and had violated laws or regulations.
The FDIC, therefore, accepted the CONSENT AGREEMENT and issued the following:


 


ORDER
TO CEASE AND DESIST


 


IT IS HEREBY ORDERED, that
the Bank, its institution-affiliated parties, as that term is defined in
section 3(u) of the Act, 12 U.S.C. § 1813(u), successors, and
assigns, cease and desist from the following unsafe or unsound banking
practices and violations of law or regulations:


 


A.            Operating with management whose policies and
practices in the area of consumer compliance are detrimental to the Bank.


 


B.            Operating with inadequate supervision over,
and direction to, the active management of the Bank in the area of consumer
compliance.


 


C.            Operating with an ineffective compliance
management system given the magnitude and complexity of the Bank’s third party
relationships.


 


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D.            Violating
federal consumer protection laws and regulations as set forth in the FDIC’s
Compliance Report of Examination of the Bank as of May 27, 2008,
(“Compliance Report”).


 


E.             Failing
to establish an effective process to monitor compliance with federal consumer
protection laws, regulations, and policies.


 


F.             Operating
with inadequate policies and procedures given the magnitude and complexity of
the Bank’s third party relationships.


 


G.            Operating
with an inadequate consumer compliance audit program.


 


H.            Failing
to provide adequate training to Bank employees, and failing to insure third
parties, and employees of third parties are adequately trained.


 


I.              Failing
to appropriately manage third party risk.


 


IT IS FURTHER ORDERED, that the Bank, its institution-affiliated
parties, successors, and assigns, take affirmative action as follows:


 


1.             The
Bank shall have and retain qualified Management. For purposes of this ORDER,
Management is defined as any “senior executive officer” as defined in section
32 of the Act (“section 32”), 12 U.S.C. § 1831(i), and section
303.101(b) of the FDIC Rules and Regulations, 12 C.F.R. §
303.101(b),  and any Bank officer with
management responsibilities involved in the Bank’s Tax Refund Solutions (“TRS”)
program or Compliance Department.


 


(a)           Each
member of Management shall have qualifications and experience commensurate with
his or her duties and responsibilities at the Bank. Each member of Management
shall be provided appropriate authority from the Bank’s board of directors to
implement the provisions of this ORDER.


 


(b)           The qualifications of Management shall be
assessed on its ability to:


 


(i)            comply
with the requirements of this ORDER;


 


(ii)           operate
the Bank in a safe and sound manner;


 


(iii)          comply
with applicable laws and regulations; and


 


(iv)          develop,
implement and administer a satisfactory Compliance Management System, as
described in Financial Institution Letter 10-2007, “Compliance Examination
Handbook, Heading II Compliance Examinations-Compliance Management  System,” (“CMS Guidance”);


 


(v)           appropriately assess, measure, monitor and control third party risks.


 


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2.             (a)           From the effective date of this ORDER, the
board of directors shall increase its participation in the affairs of the Bank,
assuming full responsibility for the approval of sound policies and objectives
and for the supervision of all of the Bank’s consumer compliance activities
including the Bank’s TRS program, consistent with the role and expertise
commonly expected for directors of banks of comparable size and risk profile.


 


(b)           The Bank’s board of
directors shall allocate resources to the compliance area that are:


 


(i)            Commensurate with the level of complexity of
the Bank’s operations to ensure the establishment and implementation of a
Compliance Management System that complies with the CMS Guidance, including
procedures ensuring the Bank’s compliance with applicable federal consumer
protection laws, regulations, and policies(“Consumer Law”)and the Bank’s
ability to appropriately assess, measure, monitor and control third party risk,
and


 


(ii)           Sufficient
to ensure the Bank’s timely compliance with the provisions of this ORDER.


 


(c)           Within
60 days from the effective date of this ORDER, the Bank’s board of directors
shall have in place a procedure that will provide for monitoring of the Bank’s
compliance with this ORDER.


 


(i)            The procedure shall include, but not be
limited to, monthly meetings to be held by a Committee designated by the Bank’s
board of directors, consisting of members of the board who will be charged with
oversight of the Bank’s compliance with this Order, and which, at a minimum,
the following areas shall be reviewed and approved: Compliance Program,
(defined in the CMS Guidance) monitoring reports, audit reports, compliance
program policies, management of third party risk, and compliance with this
ORDER. The Committee shall report to the board at each board meeting held while
this Order is in effect. The Committee and Board minutes shall document these
reviews and approvals, including the names of any dissenting directors.
Establishment of a Committee does not diminish the responsibility of the board
of directors for ensuring compliance with the provisions of this ORDER.


 


(ii)           All progress reports required by this Order,
and other written responses to this ORDER shall be reviewed and signed by each
member of the board, and such reviews shall be recorded in the minutes of the
applicable meeting of the board of directors.


 


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3.             (a)           Within 120 days from
the effective date of this Order the board of directors shall ensure that
Management establishes and implements a Compliance Management System that
complies with the CMS Guidance. At a minimum the Compliance Management System
should address the Bank’s compliance with Consumer Law, and the assessment,
measuring, monitoring, and controlling of third party risk.


 


(b)           The
Compliance Management System required by this paragraph shall be acceptable to
the Regional Director of the FDIC’s Chicago Regional Office, (“Regional
Director”)as determined at subsequent visitations or examinations.


 


4.             (a)           Within 90 days from the
effective date of this ORDER, the Bank shall develop changes to the Bank’s training program, related to Consumer Law for all Bank personnel, including senior
management and the board of directors, commensurate with their individual job
functions and duties, and submit the program to the Regional Director for
review and comment.


 


(b)           Within 30 days from the
receipt of any such comments from the Regional Director and after adoption of
any recommended changes, the Bank shall approve the program, which approval
shall be recorded in the minutes of the board of directors’ meeting.
Thereafter, the Bank shall implement the program.


 


(c)           Within
90 days from the effective date of this Order the board of directors shall
ensure that Management develops changes to the Bank’s training program for all
“Electronic Refund Originators” (“ERO’s”), used by the Bank in its “Refund
Anticipation Loan” (“RAL”) business and the employees and contractors of the
ERO’s as described below. The revised training program shall be submitted to
the Regional Director for review and
comment.


 


At a minimum the program shall ensure that
comprehensive training is provided to all ERO’s, and ERO employees or
contractors who offer to, or discuss potential tax refund services or RALs with
the public, or who have access to customer information,  in the Equal Credit Opportunity Act
(“ECOA”),and Regulation B which implements the ECOA, the Truth In Lending Act
(“TILA”), and Regulation Z which implements the TILA, the Truth In Savings Act
(“TISA”), and Regulation DD which implements the TISA, the Electronic Fund
Transfer Act (“EFT”), and Regulation E which implements the EFT, and Part 332
of the FDIC’s Rules and Regulations dealing with Privacy of Consumer
Financial Information.


 


(d)           Within 30 days from the receipt of any such
comments from the Regional Director and after adoption of any recommended
changes, the Bank shall approve the program, which approval shall be recorded
in the minutes of the board of directors’ meeting. Thereafter, the Bank shall
implement the revised program.


 


5.             Within
90 days from the effective date of this ORDER, the board of directors shall
ensure that Management revises the Bank’s Compliance Policy, and submits the
revised Compliance Policy to the Regional Director for review and comment. At a
minimum, this Policy shall:


 


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(a)           Require
the adoption of a comprehensive Compliance Program as set forth in the CMS
Guidance, which will be reviewed and approved annually by the board; and


 


(b)           Require
the development of internal monitoring procedures to ensure that:


 


(i)            The
Bank’s actual practices reflect the Compliance Policy;


 


(ii)           All
Consumer Law is being followed; and


 


(iii)          The
risk posed by the Bank’s use of third parties in providing its RAL business is
appropriately assessed, measured, monitored and controlled.


 


6.             (a)           Within 30 days from the effective date of this ORDER, the Bank shall
submit to the Regional Director for review and comment the engagement letter
and scope of the external audit required by this paragraph.


 


(b)           Within 90 days of receipt of any comments by the Regional Director, and
after incorporating any changes to the scope of the audit or engagement letter
required by the Regional Director the board of directors shall ensure that
Management has an external audit conducted of its TRS program, including the
RAL business, to ensure compliance with Consumer Law, and of the Bank’s
compliance with HMDA. The audit shall at a minimum:


 


(i)            Define a comprehensive scope, which at a
minimum shall address the deficiencies and compliance risks in the Bank’s RAL
business, and HMDA compliance as detailed in the Compliance Report;


 


(ii)           Identify
the number of transactions sampled by category or product type;


 


(iii)          Identify
deficiencies;


 


(iv)          Provide
descriptions of or suggestions for corrective actions and time frames for
correction; and


 


(v)           Establish
follow-up procedures to verify that corrective actions were implemented and
effective.


 


(b)           Audit findings,
deficiencies, and recommendations must be documented in a written report and
provided to the board of directors within 30 days after completion of the
external audit.


 


(c)           Within
30 days of receipt of the external auditors’ written report the Board shall
take action to address the audit findings, correct any deficiencies noted, and
implement any recommendations or explain in a writing signed by all Board
members why a particular recommendation has not been implemented.


 


(d)           The contract or engagement letter with the
external auditor, at a minimum, should include:


 


(i)            A description of the work to be performed
under the contract or engagement letter;


 


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(ii)           The responsibilities of the external
auditor;


 


(iii)          An identification of the professional
standards covering the work to be performed;


 


(iv)          Identification of the specific procedures to
be used when carrying out the work to be performed;


 


(v)           The time frame for completion of the work;


 


(vi)          A provision for unrestricted examiner access
to workpapers; and


 


(vii)         A provision stating that the external auditor
will present the findings of the audit directly to the Bank’s board of
directors.


 


(e)         After receipt of the external audit the board
of directors shall cause Management to have, on a semi-annual basis, subsequent
external audits. The subsequent audits shall comply with all of the provisions
of this paragraph.


 


7.             (a) Within 60 days from the effective
date of this Order the board of directors shall ensure that Management develops,
and submits to the Regional Director for review and comment, a Plan for its RAL
business (“RAL Plan”) to appropriately assess, measure, monitor, and control
third party risk, and ensure compliance with Consumer Law . The RAL Plan shall
include at a minimum:


 


(i)            A review of each aspect of the RAL business
to assess and measure third party risk to the Bank, and provisions to update
the review on an ongoing basis.


 


(ii)           A comprehensive monitoring system for all
ERO’s which contains at a minimum provisions to insure each ERO has adequately
implemented the Bank’s RAL business including understanding the process of
making a RAL loan, the application procedure, insuring the appropriate
signatures are obtained from the RAL customers, and the ability to adequately
comply with the appropriate Consumer Law.


 


(iii)          Provisions for audits of a statistically
significant number of active ERO’s under contract with the Bank on a recurring
basis, to assess their overall knowledge of: (a) the RAL business;
(b) compliance with Consumer Law; and (c) to determine if their
location meets the Bank’s standards for physical security, data integrity, and
customer privacy. In no event shall the number of ERO’s audited, including
onsite audits, mystery shopping, and internal audits, in any given tax season
be less than 10% of the total number of active ERO’s under contract for that
season. An active ERO is an ERO who has at least one approved RAL by the last
business day of January. In subsequent tax 


 


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seasons,
the Bank shall plan its audits to ERO’s that are different from those
previously visited for that type of audit.


 


(iv)          Provisions to insure that the Bank has
adequate measures in place to control its third party risk


 


(b)           Within 30 days from the receipt of any such
comments from the Regional Director and after adoption of any recommended
changes, the Bank shall approve the RAL Plan, which approval shall be recorded
in the minutes of the board of directors’ meeting. Thereafter, the Bank shall
implement the RAL Plan.


 


8.             Within 90 days from the effective date of
this Order the board of directors shall ensure that Management develops, adopts
and implements changes to the Bank’s internal audit program for the Bank’s RAL
business. The audit shall include a full scope review of the Bank’s RAL
business during and after the tax season.


 


9.             Within 60 days of the effective date of this
Order the Bank shall correct its HMDA Loan Application Registers for the years
2006 and 2007.


 


10.           (a)           Within 30 days of the date of this Order the
Bank shall correct all violations of law or regulation contained in the
Compliance Report.


 


(b)           Within 30 days from the effective date of
this ORDER, the Bank shall implement procedures to ensure future compliance
with all Consumer Law.


 


11.           Following the effective date of this ORDER,
the Bank shall send to its shareholder, a copy of this ORDER:


 


(a)           In
conjunction with the Bank’s next shareholder communication; or


 


(b)           In
conjunction with its notice or proxy statement preceding the Bank’s next
shareholder meeting.


 


(c)           Any
communication, notice, or statement accompanying the copy of the Order shall be
sent to the FDIC Registration and Disclosure Section, 550 17th Street, N.W.,
Washington, D.C. 20429 for review at least 20 days prior to dissemination to
shareholders.


 


(d)           Any
changes requested to be made by the FDIC shall be made prior to dissemination
of the description, communication, notice, or statement.


 


12.           Within 30 days from the end of the first
calendar quarter following the effective date of this ORDER, and within 30 days
after the end of each successive calendar quarter thereafter, the Bank shall
furnish written progress reports to the Regional Director detailing the form
and manner of any action taken to secure compliance with this ORDER and the
results thereof.


 


The effective date of this ORDER shall be ten calendar days after the
date of its issuance by the FDIC.


 


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The provisions of this ORDER shall be binding upon the Bank, its
institution-affiliated parties, successors, and assigns.


 


The provisions of this ORDER shall remain effective and enforceable
except to the extent that, and until such time as, any provision of this ORDER
shall have been modified, terminated, suspended, or set aside by the FDIC.


 


Pursuant to delegated authority.


 


Dated this 27 day of February, 2009.


 


 


	
   

  	
  /s/ M. Anthony Lowe

  
	
   

  	
  M. Anthony Lowe

  
	
   

  	
  Regional Director

  
	
   

  	
  Division of Supervision and Consumer Protection

  



 


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