There is some debate over who found this first, so out of respect for all concerned I am not attributing this to anyone. What is important is the fix.

There is a bug present in the is_group() function on the mainfile.php distributed with PHP-Nuke 7.0. Read on for the fix.You need to edit mainfile.php and go to the line 289 where you can find the following text:

if ($points > 0 AND $points >= $row[points] || $mod_group == 0) {
Just change it to:
if (($points >= 0 AND $points >= $grp) OR $mod_group == 0) {

Admin Note: I have updated the 7.0 download package to reflect this.