A new realm has been created to protect the /example directory with Basic authentication, however, the user is instead redirected to login.fcc. Login.fcc is not specified anywhere in the policy store.
12.8x Policy Server on Windows
The policy server had been up a long time and likely had memory corruption. This should not occur, but the chances of such increase the longer a process stays running without restart.
Restarting the policy server cleared the problem.