Jackson Hewitt Drops Republic
Republic Bank of Kentucky reports that Jackson Hewitt has notified the bank that they will terminate their agreement for tax products for the upcoming season.
While all parties were working with the knowledge that Republic could no longer offer a refund anticipation loan product, the general assumption was that their agreement to provide refund anticipation checks would remain in place.
Republic received similar news from JTH Holdings, a.k.a. Liberty Tax, earlier this month. When the two events are taken together, Republic faces a big problem. Republic says that forty percent of its revenues for the six month periods ending in June 2012 and June 2011 were derived from their relationship with Jackson Hewitt. The revenue stream from Liberty had been almost as large.
Here is the big question: when will the other shoe drop? The management at both Liberty Tax and Jackson Hewitt would look very foolish if they tried to operate their current business model without an ample supply of settlement products. That is why, if both are walking away from a sound agreement with Republic, then they most certainly must have another option in the wings. Tax season is not far off. It is time for any large preparer to iron out any kinks in changes to the software at their stores.
Rachel Wishon
September 28, 2012
Are you implying that you do not know what Liberty, J-H and others (including Republic, the all-time best player)have planned? Or are you just being safe, waiting for the confirmations that likely won’t offivially come for another couple of months?
sdoggie
September 28, 2012
Yes, I am implying that I do not know what they are going to do. I am also implying that I think I know what they are going to do. I think they are going to find a non-bank for tax refund loans. I had originally thought that it would be a non-bank external to their corporate family, but now it seems possible that it may a non-bank sub of one of the preparers. I hear things from my contacts out there but I think the only people that really know right now are in Parsippany and Norfolk.
Please if you know something, tell us!
italian stallion
October 10, 2012
Just saw the HRB press release about the possibility of Block dropping its S&L charter of its bank to get away from being under federal banking regs. Presumably to position itself to offer a RAL-like product to compete against JH and Liberty. Adam, what is your take? What do you think the model will look like for these RAL-like non-bank products?
sdoggie
October 10, 2012
That is really thinking between the lines.
Yes, I can see what you are saying. I\’ll write something shortly.
sdoggie
November 2, 2012
Stallion:
Sure, let me offer a few comments on the Block news.
First, I think we need to understand that any sale is going to take time. Just because they hire Goldman doesn’t mean that there is a suitor. I suppose its great to have a charter and all of those deposits are of value. But it may be a while before HRB frees up that capital.
I don’t know if they are going to get a RAL. They had success with the free RAC promotion last year. I think they said that they were not going to do it this year. That is a mistake in my opinion.
I think the model for non-bank RALs is in flux. One possibility is that the person getting a refund will have a chance to sell the proceeds of their refund. I am sure that the return for their refund will reflect a healthy discount. I don’t know who is going to do that. There is also the chance that it will be a non-bank tax prep sub. You never know. It would take a lot of cash to fund that. Then, it could be that the tribal lenders get into the game.