Although H&R Block cannot offer refund anticipation loans, they do intend to provide credit to their customers during the upcoming tax season.
Block intends to offer the "Emerald Loan" in amounts of either $750 or $1,000. The term is 30 days. The loan fee
is $23 for a $750 loan and $30 for a $1,000 loan.
Here is how it works, according to two preparers that I spoke to today.
a) the consumer must complete their return before they can apply for the Emerald Loan.
b) The Emerald Loan is a separate transaction. Some tax preparers may be put off by how this product will be operationalized. Apparently Block is not going to allow preparers to do both a return and a loan for the same filer. Instead, a filer that wants a loan will have to go to another staff member. Same store, different desk.
c) The "Loan Specialist" can offer a loan if the filer's passes the muster of their underwriting. A credit score is part of that determination. The "loan specialist" will put together the underwriting package. The loan is not a sure thing. The preparer didn't know what it would take to make the grade, because no one has done an Emerald Loan yet. The product is not available until the tax season begins. A different preparer reiterated the same thing: you will have to qualify.
e) The consumer gets their money right away. "It will be instant," said the second preparer.
The immediacy of the loan will probably make it a preferable alternative to the refund anticipation check. Block lost its refund anticipation check privileges with HSBC, but they are going to replace that with an in-house RAC. The check fee, according to the second preparer, will be $32.99, but there will be the standard 8 to 15 day waiting time before a filer with a RAC can access their money.
It is important to state that the Emerald Loan is not the same as the Emerald Advance. You can get an Emerald Advance right now. All you need is a recent pay stub and the ability to meet underwriting requirements. The Emerald Advance is a longer term product. An Emerald Advance card can remain open for almost a year, if the account is opened at the right time of the year. To do that, a customer has to do one of two things. Either the account holder can put a direct deposit on to the card, or the account holder can deposit at least $300 in to the Emerald Savings account. Just before the tax season begins, the Advance line of credit accounts are closed.
The Emerald Loan will be provided by Block Bank.
I am fairly sure that Block promised that they would not use their OTS charter to offer refund anticipation loans when their application was up for regulatory review a few years back. Block is not offering a refund anticipation loan product with their charter. Nope. They are not doing that. It is a separate transaction, available to consumers that have a tax refund.
Is it fair to say that this is just a RAL in a green cape? Well, maybe not. Not every person with a refund will be able to get an Emerald Loan. Many will probably be turned down because they don't have the appropriate credit score. At the same time, plenty of people were turned down for RALs in the past, albeit because of an outstanding federal tax lien.
I imagine that this is going to be a one-season product. By this time next year, the OTS will not exist. Block Bank and other OTS-regulated institutions, with the exception of a few state-chartered thrifts, will move over to the OCC. Will the OCC stand for the Emerald Loan? Maybe they will, because this is not a RAL. At least, it is not exactly a RAL.
Will consumers be able to get an Emerald Loan if they have a $1000 refund due on both their federal and state taxes? Right now, it isn't legal to get a RAL that is collateralized by a state refund. Block could argue that the Emerald Loan is not structured with such a backstop.
It is hard to fault Block for the pricing on this product. Thirty dollars on $1,000 for thirty days is thirty-six percent.
I can imagine the conversation that is going to take place in the Block offices:
HRB Preparer: So, I'm done with your return. Hey, guess what, you are going to get $3,600 back on your federal and $781 on your state! By the way, how are you going to pay for your preparation fees today?
Consumer: Er, I'd like to do like I did last year. I'd like to get a loan. I'd like my money today, if possible.
HRB Preparer: Gee, I'm sorry. I can't help you with that at all. We don't offer refund anticipation loans. Hey, can anyone here help out our filer with his problem? He wants his money today and he doesn't want to pay for his tax prep fees out of pocket. I can't help him, because we don't do RALs. Anyone got any ideas?
HRB Loan Specialist, one desk over: Well, friend, I can't offer you a RAL, either. But, I think I can help you. How would you like your money today? How would you like to have a loan that would help you with those tax prep fees? Again, I don't have a refund anticipation loan. I have an Emerald Loan! Actually, its better than those old RALs. You don't have to wait 24 hours. We can do this right now. But one thing, and this is very important. You have to move over to my desk.