Terms for the Liberty Tax Refund Anticipation Loan
Some details of the terms of Liberty Tax Service’s new refund anticipation loan product, known as the Instant Cash Advance, are becoming clear as the tax season approaches.
Through its non-bank subsidiary, JTH Financial, Liberty will charge $49.90 for the instant cash advance. In addition, there will be a processing fee payable to the preparer and then an additional finance charge. The last charge will vary according to the size of the advance, which could be as large as $2,000.
With those terms, it is likely that most consumers will pay more than $60 for a RAL this year.
Liberty says that it will only begin to take applications for the ICAs on January 21st, and when they do, customers can expect to have to wait for 24 to 48 hours to receive the advance.
The loans come from JTH Financial. A few days ago, I posted an entry about where Liberty has been able to find a source for its short-term capital needs. A consortium of banks, led by SunTrust, have agreed to offer Liberty $170 million in financing. Liberty will have a term loan of approximately $25 million and a line of credit of as much as $145 million. To date, Liberty has not given the impression that they will draw on the full line of credit, but they do have that capacity.
It would probably be good news for Liberty if they needed to draw on the entire line of credit, because it would most likely mean that their non-bank subsidiary JTH Financial had been able to sell at at least 72,000 (more or less) instant cash advance products. If that demand was spread out over time, then such a draw could reflect even more.
Liberty has about 4,000 branches in the US and Canada. Approximately 300 of those branches are in Wal-Mart stores. According to comments made by John Hewitt during a December investor presentation, one of the operating strategies which it believes give the company a better value proposition to investors is its tendency to have more franchisee ownership of its stores.
Liberty hopes that its ICA will be available in 26 states.
dr zhivago
January 16, 2013
So instead of banks running RALs, Liberty will just get a line of credit from the banks and run the RAL itself?
BTW, Liberty’s $168M revolving credit facility is only $38M higher than its previous $130M facility as of 4/30/12.
Adam Rust
January 17, 2013
That\’s right! I think they call it whack-a-mole.
The credit facility choice is about the seasonality of their cash flows as a whole as well as about the volume of RAL funding. They only make money during two quarters per year so they need some credit to keep the lights on in September.
emily
January 30, 2013
Is there a way to check the status of your loan on the internet
Adam Rust
January 31, 2013
You can check the status of your return (not your loan) with the IRS, but only once it has been formally filed and then accepted.
With Liberty, it is my sense that people may or may not qualify for the ICA loan. Did you qualify?
Christine
February 4, 2013
I was hoping to obtain one of the RAL’s this year because I need my refund ASAP (in previous years I refused to pay the outrageous fees and just waited a few weeks for my direct deposit, but at this point it’s worth it for me to pay for a RAL in order to have the money two weeks sooner). However, I called Liberty Tax to ensure I could get this when I made an appointment – but they are not doing it in my state (Indiana) nor Illinois (I live a few minutes from Chicago). So if anyone IS thinking about purchasig the RAL, call Liberty first to make sure their bank has approved your state for loans.
Very Unhappy Customer
February 7, 2013
This is my first year going to Liberty as I have always gone to Jackson Hewitt, and was gonna file my own return. However since I needed my money quick I went to liberty to apply for the loan which I was told I should have within 24-48 hours after approved. As of this moment it has been exactly one week today and I still have no approval or denial. When I call the bank they tell me they don’t have me in there system and Liberty tells me the bank is searching the system for my application but for some reason they can not resubmit it. Seems like a way over rated product with alot of glitches. This is my first and last experience with these people.
Adam Rust
February 8, 2013
Did they tell you that your application was approved while you were in the store?
Would you have used Liberty if they didn\’t have loans?
Do you think the price was fair? How much did they say it would cost to get their loan?
What are you going to do next year?
Anji
February 11, 2013
I do my own taxes but need the $ quickly, so I paid $348 for liberty to fill in the boxes like I had already done. Then I paid $49 for the loan plus a $9 fee for I don’t know what. Then instead of picking up my check today they tell me that the bank is no longer accepting applications! Something tells me they knew that when I filed!