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Block Franchisee Has Early Season RALs

Adam Rust's picture

Posted January 8, 2013

A non-profit group representing the Native American community has reported that some of its clients are getting refund anticipation loans from an H&R Block store in Northwestern New Mexico.

"They offer these products beginning in November," says Shawn Spruce of First

Nations Development Institute, a native-led non-profit based in Longmont, Colorado which serves the Native American population in this community in Northwestern New Mexico.

Documents show that S/W Tax Loans has been offering early season tax refund cash advances since at least last year.

"Borrowers bring in year-to-date paystubs and a copy of last year's tax return, if the preparer doesn't already have it on file," says Spruce, who discovered the situation after some of his clients came into his office with documentation of the loans. "Sometimes a borrower must also provide proof of the previous year's refund, such as a bank statement that shows a direct deposit from the IRS. The preparer then completes a quick return and calculates an estimated refund, which is used as collateral for the loan."

While the companies are separate entities, both S/W Tax Loans and the Block franchise operate out of a storefront at 923 W. Aztec in Gallup, New Mexico.

Although S/W can work with people that file their taxes elsewhere, the Block franchise and the S/W Tax Loan office are in the same building.

The arrangement is significant for at least two reasons:

First, it confounds what people would expect about H&R Block stores. Ever since Block's contract with HSBC to provide refund anticipation loans was rescinded, company-wide strategies have added partial-season incentives which entice customers to come into the stores for free bank products. Last year, Block stores had free refund anticipation checks during the early season.

We’ll just say that this is an exception," said Gene King, a spokesman for H&R Block. "H&R Block does not offer refund anticipation loans." King indicated that his company continues to be in contact with the owner of the Gallup store.

But its also important because it one more example of the near future. It isn't just that the funding for these advances are not sourced from HSBC. It is that they are not sourced from a bank at all. The S/W Advance is written on a check held in the name of a business account at a Wells Fargo in Van Wert, Ohio.

An S/W Tax store representative indicated that the company had been offering the early season RALs this year as well. She said that they intend to offer a traditional RAL-style product during the upcoming tax season, she could not be specific about pricing until the IRS clears up uncertainties in this year's tax forms.

This picture shows a contract (with names removed) from last year.

This borrower received a $500 cash advance with a finance charge of $116.89. The disclosure indicates that the loan has an APR of 228.7 percent.

The Loan Agreement and Disclosure Statement from S/W Tax Loans.



















This $500 advance came with a finance charge of $116.89. That amount exceeds the market-clearing price for a bank-issued refund anticipation loan.

Fine print in the first paragraph reads:

For the purposes of this Loan Agreement and Disclosure Statement ("Loan Agreement"), "RAL" means a Refund Anticipation Loan, "SW" collectively means S/W Tax Loans, Inc. or dba Fast Refund Loans, a subsidiary of S/W Tax Loans, Inc., "RAL Agreement" means the RAL Authorization and Certification Agreement of the same date, the terms and conditions of which are incorporated herein, and "I", "me" and "my" means each person who has applied to SW for a RAL.

Further down:

"I promise to pay the RAL amount set forth in the "Total of Payments" section of this Loan Agreement on demand or when my anticipated refunds are received from the federal...[government.]"