If it was not clear before, this should make it fairly straightforward that there will be refund anticipation loans available to consumers in the upcoming tax season.
The agreement includes both assisted refunds and refund anticipation loans.
I reported that Republic would be able to offer refund loans through Feb. 6, 2012 earlier. This reflected the announcement that Republic's hearing before an administrative law judge (ALJ) to contest the FDIC's directive against their RAL program had been pushed back to that date. That was based on a comment from a Texas tax preparer and from a sentence in a July 8-k released by Republic. In that document, Republic CEO Steve Trager said "Our hearing before the ALJ is currently set to begin on February 6, 2012."
The new agreement has several changes:
- Republic gives up its right to unilaterally cancel the settlement contract. Republic gets the right to cancel the contract if there is a regulatory action against their program.
- Republic will be the exclusive tax product provider in the Jackson Hewitt locations that offer those services. In practice, this is not a change - Republic was Jackson Hewitt's only provider last year. However, it is significant that this exclusivity will apply to each of the next three tax seasons.
- Jackson Hewitt pays for the technology and the people to run the program.
Each tax prep location that offers Republic's products has to sign a contract with Republic. Presumably this will facilitate the ability of Republic to make sure that staff is trained and committed to observe the relevant lending laws. Those laws include the Equal Opportunity Credit Act, the Federal Trade Commission Act, and the Truth-in-Lending Act. It is possible that it would also include explicit instructions for state laws as well as IRS expectations.
Left unsaid are the terms of how Republic and Jackson Hewitt will share risk. In the past, Jackson Hewitt has had to buy back some loans that were not collectible. It is also not clear if Republic will compensate preparers for delivering the products, or if there will be any other sort of cross-company compensation. Both companies stand to participate in the revenues from each settlement product.
This could mean that Liberty Tax will also have refund loans next year. As a private company, Liberty does not have to report these kind of updates to the SEC. I don't know the relevant law, but I imagine that Republic would only have to file an 8-k if their existing program agreement was amended. It could also mean that independent tax preparers will be able to provide tax refund loans.
The FDIC could still stop this. As the agreement contends, the RALs would stop if the FDIC is successful in the February 2012 hearing.