With expansion plans that will vault it to the upper tier of RAC facilitators, EPS Financial is poised to tell us if an unbanked tax filer pick a new tax preparer because he or she can save $20 on the back end of their return?
EPS is a relatively new (since 2010) entrant in the bank product settlement field, but with the loss of Chase, they are picking up a lot of business from independent preparers.
Yet the company's approach, which is to offer lower-price settlement products, assumes that people will respond to a
chance to save money. EPS' web site encourages preparers to tell potential customers that they can save a few dollars. I hope that they are right. It costs $20 to get a check for a federal refund, $10 for a direct deposit onto a prepaid card, and $5 for a refund loaded onto one of their in-house E1 cards. There are smaller fees for state refunds.
The "other guys" charge more. At some of the bigger chains, a RAC costs more than $25 and can even be as high as $30.
Unfortunately, there is a lot of mystery to debt settlement pricing. Unless they seek out price disclosures, it is very likely that the filer won't know the cost of a RAC until after their return is completed. Certainly, Jackson Hewitt is telling the world that they have loans and Block doesn't, but that's a claim about availability and not about price. There's also the issue of bank partner incentives. Ohio Valley Bancorp (OVBC) offers between $2 and $6 to every preparer that can sell a debt settlement product (or products) to a filer.
This is a link to the fee schedule for consumers that want to get the E1 card for their tax refund and then proceed to use it as a regular instrument from then on. The E1 card has a low monthly balance, but on the whole, I would not include it in the "low-cost" category. Using the card at an ATM, which will be a frequent event for many un-banked users, is costly: $1 for a balance inquiry, $1 for an ATM decline, and $2.50 for an ATM withdrawal. There's also a 50 cent fee to make a PIN transaction.
EPS' President, Clark Gill, says that his company is growing very quickly. EPS claims to have signed up 7,000 preparers last year. Gill thinks that EPS may process one million tax refunds (approximately) during this tax season.
Gill worked with Beneficial "way back in the day," and later at HSBC.
EPS' bank partner is Bancorp Bank. Bancorp is a familiar name in the un-banked world. While they maintain just one bank branch (which is not a physical entity, they have about $2 billion in assets. Bancorp is an issuer of debit cards. According to the Bancorp, they are the country's fifth largest issuer of open-loop debit cards and a big participant in the health savings account marketplace.
It will be interesting to see how the low-price idea works out. If it does do well, then it makes an important statement about the decision-making in unbanked households. There is a sense out there that some consumers will pay any price for a quicker refund. The Treasury pilot is an experiment with the same question, in fact. Will people respond to better pricing?
This is a product that will work on lower margins, so scale is going to matter.
The way I see it, this company's growth is inextricably linked to the rapid change that has taken place in the tax product settlement marketplace. EPS' business could swell if refund anticipation loans are no longer available.
"Just what has happened in the last year has been a huge plus for us," says Gill. "And, if they [RALs] are gone, then that will be huge, too."