HUD established a long-term of goal of improving the energy efficiency of homes in its Housing Choice Voucher Program (Section several years ago.

Right now, HUD spends $5 billion per year on energy bills. That figure increased by 13.5 percent between 2006 and 2008, alone. Energy costs for subsidies to Section 8 increased 18 percent.

HUD provides utility allowances to 84 percent of the residents in its Section 8 program.

In their own words, HUD states that the focus of its energy plan is Energy Star. EnergyStar is a (more…)

There are four important votes coming before shareholders of banks and financial services firms during the upcoming annual meetings.

Calvert will ask shareholders of BB&T and Capitol One to evalute “overdraft policies and practices and the impacts these practices have on borrowers.”

Christian Brothers Investment Services will ask shareholders of Cash America, a large payday lender, to adopt a policy that ends payday lending.

The Community Reinvestment Association of North Carolina is asking shareholders of JP Morgan Chase to “cease its current practice of issuing Refund Anticipation Loans.”

I am thrilled to see the socially responsible investment community acting to address these issues. This movement has been very active in pursuing important causes for environmental health and human rights.  There has been less attention to financial issues. That day has come. Perhaps this reflects how even the well-off have been hurt by the subprime lending crisis. My only lament is that there are not more than four ballot initiatives.

The FDIC is shutting down refund anticipation loans and refund anticipation checks.

I just spoke to a source at River City Bank in their tax group. I asked him if could confirm that the FDIC told River City that they had to stop making refund anticipation loans.

“Yes,” he said, “it is true.”

Why?

“As far as we know, they are acting against the third party relationships.  They are concerned with tax preparers, as opposed to bank personnel.”

He was clear that the timing was not specific, and that RALs could very possibly remain available through next tax season.

“It is unofficial”, he said. “We’re hoping that they will let us go one more year, but after that, that is how it is looking at this point.”

I pressed him to say if this would be the case for other banks.  Would it be the case for Republic?

“Yes,” he said, “unofficially, that is the case.”

Sheila Bair's FDIC Comes Through for the People!

The FDIC has had concern in the past about the ability of bank partners to monitor their tax preparer partners. That was the basis for their cease-and-desist order against Republic Bank, issued last year. Republic is one of the tax prep partners for Jackson Hewitt. It makes sense that the underlying justification for this new directive would spring from the same anxiety over the lack of oversight.  It is hard to make sure that scores of tax franchisees are following the law. It has been hard for the FDIC to even get the bank partners to agree to take responsibility for their staffing and training.

As an advocate, I have to say that this is very exciting.  This means that the day that we’ve been working towards for at least four years is now here.

RALs are not done.  JP Morgan Chase and HSBC will not be touched by this decision. Moreover, the source at River City emphasized that this might not be something that shuts down their participation for at least one year.

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I spoke to a source at Republic’s tax products group.  He could not confirm that Republic had received this letter.  In fact, he was somewhat upbeat.  He said that with the OCC’s release of a guidance last month, it seemed plausible that there would be a long-term future for refund loans products.

“Now that we have an official statement on how do this and be in compliance,” he said, “its much better.”

“I think it is good,” he added. “It would not be fair for the government to say that Chase and HSBC can do this, but Republic and other state-regulated banks cannot.”

He added that the FDIC had said that they would be speaking with Republic, but that action had been delayed.

It has been quite a year for regulatory attention on this market.  First, the IRS established new training standards for tax preparers.  Then, the OCC issued guidelines for refund anticipation loans. Now, it seems that the FDIC is stepping in to close the door on bank participation in RALs.

The FDIC did the same thing a few years back with payday lending. They did not make payday lending illegal, but they refused to allow their banks to fund it.  That alone impacted the payday market. Given the liquidity demands of funding RALs, a lack of bank participation would cripple the RAL market. It seems possible that without scale, that preparers would not even be able to have enough access to RALs to make them a standard offering in their stores. That situation would be predicated on Chase and HSBC exiting as well (and no new banks entering!), though.

Refund anticipation loans may cease to be available after the 2010 tax season, according to some comments from tax preparers.

An internal memo sent by River City Bank to its tax prep partners references an FDIC communication that suggests that RCB prepare to exit its RAL business.

This is not confirmed.  At the same time, the market seems to be moving in response to this news.  Shares of H&R Block are down almost 15 percent this morning and now trading at a year low. That makes no sense, of course, because Block would not be impacted by FDIC action.  HSBC provides RALs for Block.  HSBC is regulated by the Office of the Comptroller of the Currency.  Block Bank is regulated by the Office of Thrift Supervision.

JP Morgan Chase, funder of RALs to Mo’ Money Taxes and approximately 13,000 independent preparers, would also be passed over.

For now, this is unconfirmed.

If we had a vibrant economy where delinquincies were receding and employment was roaring back (NOT!), it would make sense that banks would take on a little more risk.  The evidence is clear, though.  We have  recovery in share prices, but the budgets of households are not back where they were. Credit card charge-offs are up, and unemployment is still high.

That is why it seems odd that some of our largest banks have decided to offer a new payday-loan product.  US Bank, Wells Fargo, and Fifth Third are three banks that are rolling out short-term loan programs where APRs exceed 120 percent.

Did I mention that each of these banks was given a huge TARP investment? True, US Bank and Wells have already repaid their TARP funds, and Fifth Third indicates that it intends to do the same in the next quarter.

I think the appearance of these new products reveals how this credit crisis is hurting middle America. Consumers don’t want to use loan products like payday loan-priced advances on their next paycheck.  They would prefer to use credit cards (interest rates of as much as 29 percent) or a line of credit (perhaps 12 percent.) These new payday products cost at least 120 percent. People aren’t dumb. They are taking this bad deal only because banks aren’t offering something more reasonable.

Let’s review the new payday products.

Fifth Third’s Access Now: “when you need money but you don’t have time to wait.” The cost is simple – $1 for every $10 advanced.  Funds are repaid with the next direct deposit. If your (more…)