The most important regulatory action, of course, was the FDIC's settlement with Republic Bank & Trust, discussed in Section I
There are currently a total of twenty states regulating RALs: Arkansas, California, Colorado, Connecticut, Illinois, Louisiana, Maine, Maryland, Michigan, Minnesota, Nevada, New Jersey, New York, North Carolina, Oregon, Tennessee, Texas, Virginia, Washington State, and Wisconsin. The laws for thirteen of these states are summarized in Appendix A to NCLC's model state RAL law.
Most of these laws rely on disclosures to protect consumers from RAL abuses, which are limited in their effectiveness. However, RAL laws in Arkansas, Maine, Maryland, Minnesota, and New York provide substantive protection by prohibiting add-on fees. The Connecticut law prohibits RAL facilitators from facilitating a RAL costing over 60% APR; however, the federal Court of Appeals for the Second Circuit struck down this provision, holding that it was preempted by federal banking law.
- Cease offering RALs after .
- Pay a $900,000 civil money penalty.
- Implement a system of verifications in place to ensure that its partner tax preparers operate their future tax settlement activities with appropriate safeguards.
- Review all advertising for tax settlement products at preparer's offices.
- Conduct audits, including surprise on-site visits and mystery shopper surveys, at 10% of preparer locations.
Prior to the settlement, the FDIC had issued an “Amended Notice of Charges for an Order to Cease and Desist,” which detailed widespread legal violations in Republic's RAL program, including:
These laws regulate both credit repair organizations and “any person or organization who assists or offers to assist consumers in obtaining an extension of credit,” which should include tax preparers who offer to arrange RALs
- Truth-in-Lending Act (TILA) – The FDIC found that copies of the written disclosures required by TILA were regularly absent from loan files.
