NetSpend will move some of its prepaid card business away from MetaBank.

In a filing today, NetSpend indicated that it has signed non-binding agreements with The Bancorp Bank (TBBK) and H&R Block Bank.

Since October 6th, NetSpend concluded that the OTS’ Supervisory agreement restricted the ability of MetaBank to service any new relationships with MetaBank distributors. In other words, if NetSpend reached an agreement to put its cards in the offices of a retailer, they would not be able to use MetaBank as the issuer of that card. NetSpend has new distribution partnerships in the works, so the ruling (more…)

H&R Block filed a lawsuit (8-K here) in the Eastern District of Missouri this morning against HSBC that would force the US subsidiary of the British bank to honor their refund anticipation loan agreement.

H&R Block’s Katie O’Neill Rauber told reporters that HSBC is citing the IRS’ decision to cease to offer the debt indicator as grounds for nullifying their 2005 contract to provide funding for refund anticipation loans.

With the loss of the debt indicator, banks face more risk with RALs. Block had indicated that it has a plan for underwriting these loans. Nonetheless, the risk is much higher than in the recent past. Perhaps the risk is too much for HSBC. It is also possible that the loss of the (more…)

The OTS directive to MetaBank sent the Iowa thrift’s shares tumbling and then set off a series of subsequent events, from the suspension of an IPO to problems in the tax plans for several national tax companies, but all of it could come undone relatively quickly.

Here is the background: The OTS Directive broke existing plans at Santa Barbara Tax Products Group, at NetSpend, and at Jackson Hewitt. SBTPG had an agreement (from August 10th) that it would work with RALs and RACs from MetaBank.  SBTPG intends to facilitate RALs in the upcoming tax year. NetSpend made MetaBank its preferred bank partner. Jackson Hewitt needs more RAL money, and it needs it to be wrapped up in five weeks.

This announcement poses a significant regulatory problem for MetaBank. It comes at absolutely the wrong time for (more…)

The concern by the Office of Thrift  Supervision which culminated in its issuance of Supervisory Directive on Tuesday evening was not the product of a quick reaction.

MetaBank’s partnership with NetSpend to offer the i-advance goes back for some time.

MetaBank’s partnership with Santa Barbara Tax Products Group extends to tax season 2010. On August 10th, the two companies signed a new multi-year agreement. It signaled a new level of involvement. MetaBank agreed to offer refund anticipation loans through the facilitation of SBTPG.

We submitted an initial set of comments that we made to the Office of Thrift Supervision about MetaBank back in March.

Today, MetaBank’s business model is facing a set of new challenges.  They cannot make those refund loans for (more…)

NetSpend will not go forward with an initial public offering of 18.5 million shares of its stock. NetSpend’s struggles point to regulatory problems with their card issuance partner, MetaBank.

They had hoped to fetch between $10 and $12 per share for the prepaid card company.

On Tuesday evening, the OTS issues a Supervisory Directive to MetaBank. It required MetaBank to cease both its refund anticipation loan business and its i-advance line of credit. MetaBank is the bank partner for most of NetSpend’s cards and the sole source of funding for the i-advance product.

Management at NetSpend claimed that there would be no impact to their profits. That’s hard to believe. For one, NetSpend owns 4.9 percent of MetaBank. MetaBank’s stock has taken a big hit, falling about 30 percent in the last 24 hours, and it stands to reason that MetaBank is about to lose a lot of its projected revenue. That’s only one of several clear points where NetSpend is going to suffer because of this situation. Right off the bat, there is the fee revenue that had been coming to NetSpend because of the i-advance.

Cardholders are charged fees associated with additional products and services offered in conjunction with certain of our GPR cards, including MetaBank’s iAdvance (TM) line of credit, overdraft protection through our issuing banks, a variety of bill payment options, and card-to-card transfers of funds through our customer service.

Seems pretty hard to miss the message here. This is from the s-1.