Contemplating A Jackson Hewitt After Bankruptcy

Jackson Hewitt’s business model will change once it exits from bankruptcy. The only question is how.

I will not speculate on the likelihood that some potential possibilities – such as more kiosks or more focus on digital – will occur.

I can say that people should be ready to watch how this bankruptcy alters the relationship between Jackson Hewitt and Republic.

A reorganization is a hiccup that can upend any existing commitment. Jackson Hewitt’s relationship with Republic is no different. Jackson Hewitt will have the opportunity to renegotiate its program agreement with Republic Bank.

Re-negotiation is not without precedent. With Republic and Jackson Hewitt, it is actually a somewhat normal course of business. Their program agreement runs through 2015, but it is regularly amended. It was amended last week, in fact.

Republic will be in the driver’s seat. In an odd way, OCC and FDIC regulatory intervention has helped their business. The competition has been withered away and now they are the only game in town. This could change, but for now, Republic is in a sweet spot. This means that they have bargaining power to maximize their position with their RAL partners. Last year, Republic changed the terms of their agreements with tax preparers. Preparers had been able to generate rewards for bringing bank products to banks. The terms were restructured to end that generosity.

Republic could do something in the save vein for the upcoming year. They could add fees or decrease their liabilities for any loans that sour.

One caveat is that any of these new arrangements are subject to the actions of the FDIC. There won’t be any loans next year if the FDIC is able to win this fight in the September hearing.