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Reaction to the OCC RAL Directive

Adam Rust's picture

Posted December 27, 2010

People have a lot of questions about the OCC's directive to make HSBC end their Settlement Products Agreement with H&R Block.

Here are a few:

  • Why did the OCC do it?
  • Will the FDIC do the same thing?
  • Will H&R Block be able to come up with a substitute means of helping their customers settle the cost of their tax preparation fees?

HSBC reports that the OCC required them to terminate their contract, known as the HSBC Settlement Products Program, on Christmas Eve. Block's 8-K reports that the OCC directive required HSBC to immediately stop providing any form of refund anticipation loans and refund

The OCC Strikes Again: No RALs for HSBC

Adam Rust's picture

Posted December 25, 2010

The Office of the Comptroller of the Currency (The "OCC") directed HSBC to stop providing funds for refund anticipation lending.

H&R Block says that HSBC has ended its contract to provide the tax preparation firm with refund anticipation loans. The agreement cancels all of the tax settlement products offered at the Block stores through HSBC. This includes

Block: In Talks to Settle with HSBC

Adam Rust's picture

Posted November 11, 2010

H&R Block says that it has entered into talks with HSBC USA to smooth over their impasse on their contested tax settlement contract.

Block didn't offer details and they didn't submit a filing to the Securities and Exchange Commission. The latter would only be necessary if there was news that had a "material, definitive" impact on the company's financials.

Block and HSBC amended their tax settlement products (refund anticipation loans and refund anticipation checks) in the spring of 2010. Block makes about forty percent of refund loans every year. With news that other tax preparers were struggling to secure funding, Block seemed poised to have a competitive advantage of sorts.

HSBC Wants Out of Its RAL Contract

Adam Rust's picture

Posted October 18, 2010

H&R Block filed a lawsuit (8-K here) in the Eastern District of Missouri this morning against HSBC that would force the US subsidiary of the British bank to honor their refund anticipation loan agreement.

H&R Block's Katie O'Neill Rauber told reporters that HSBC is citing the IRS' decision to cease to offer the debt indicator as grounds for nullifying their 2005 contract to provide funding for refund anticipation loans.

With the loss of the debt indicator, banks face more risk with RALs. Block had indicated that it has a plan for underwriting these loans. Nonetheless, the risk is much higher than in the recent past. Perhaps the risk is too much for HSBC. It is also possible that the loss of the

Is Block on the Hook for Sour RALs?

Adam Rust's picture

Posted August 31, 2010

Unless I am mistaken, H&R Block will share in much of the risk for its refund anticipation loans during the upcoming tax season.

Block has a relationship with HSBC for its refund products.  Block's customers are delivered to HSBC for refund loans.  HSBC advances the customer cash based on the expectation that they will have a refund.  In the past, that expectation was backed up by the IRS debt indicator. HSBC won't have that kind of certainty next year.

My reading of Article IV, Section 4.5, part (a) of this filing, made in March 2010, is that Block will have to refund to HSBC on their losses from RAL advances that cannot be collected.

Mo' Money Taxes - OMG!

Adam Rust's picture

Posted January 14, 2010

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I can't make this stuff up.  If you wonder why the IRS  says that it needs to make sure that tax preparers need to meet some kind of professional standard, then look no further.

Mo' Money Taxes is a medium-sized tax preparation company. They have over 100 locations in the Mid-South. Most of their firms are in Tennessee and Mississippi.  They have 10 locations in North Carolina.  I called an office to see if I could get my money fast. They said it was no problem.  "Bring in your paycheck, we'll get you an estimate."

The staffer in Raleigh indicated that they partner with Chase for their tax refund anticipation loans.

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