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RALs

MetaBank Concedes: "No RALs in 2011"

Adam Rust's picture

Posted December 3, 2010

On Thursday afternoon, MetaBank made it official that they will not offer tax-related products for the upcoming tax season.

The OTS issued a directive earlier this year that forced MetaBank to suspend its i-advance loans. The OTS also said that the bank would have to have permission before they could provide tax products like refund anticipation loans (RALs) and refund anticipation checks (RACs).

While it remains possible that the OTS will eventually grant the permission to provide those RACs and RALs, time has run out for the 2011 tax season. In an 8-K released after the bell on Thursday, MetaBank told investors that they would not participate in the upcoming year.

Wells Fargo: Financier to the RAL Business

Adam Rust's picture

Posted June 4, 2010

While BankTalk goes to great length to excoriate (big word!!!) the immediate providers of refund anticipation loan dollars, there are other financial institutions that make RALs possible.

Wells Fargo, for instance, is providing the credit lifeline that keeps Jackson Hewitt in business.  On April 30th of this year, Wells entered into a new definitive material agreement to restructure $200 million of debt to Jackson Hewitt. A key fact, in my mind, is that the loan specifies that Wells' willingness to finance JTX is dependent upon the RAL business.

A source from a New York investment firm tipped me off on this.  He said that Wells has a

Mo' Money Costs More Money

Adam Rust's picture

Posted January 18, 2010

I  visited Mo' Money Taxes twice over the weekend.  My conclusion is that Mo' Money is exactly what it claims to be.  Mo' Money costs more money.

Indeed, when I went into the Mo' Money in a strip mall on one of Raleigh's outer suburbs, the staff was more than able to give me an estimate.  Their estimate was simple and straightforward. Although it was based upon several moving parts (the amount of my refund, the projected cost for the tax prep, and my RAL fees), the preparer seemed both certain and giddy that I'd be better off in short order.

I am not sure why he was so certain.  Indeed, all I had done was bring in a pay-stub from August. That was all they told me that I would need when I called on the phone.  Maybe he was certain because we were in a real office, and he was using a real computer.  He was definitely giddy. He seemed so thrilled to be a part of my sudden fortune.

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.

OCC Turns Off RAL Spigot at Pacific Capital

Adam Rust's picture

Posted December 30, 2009

Mainstream tax prep customers will be less likely to use a refund anticipation loan this year, an outcome that reflects a new awareness by regulators at the Office of the Comptroller of the Currency. Perhaps it was meant to stay under the public radar, or maybe it was just a gift to the consumer advocates that have fought this battle, but PCBC announced the OCC's instruction on Christmas Eve in a short 8-K.

This is very good news.  Pacific Capital, a Santa Barbara bank that operates Santa Barbara Bank & Trust, announced in a filing on December 24th that the OCC had asked it to cease its tax refund business. I get a kick out of how the people at Pacific Capital tried to spin this event:

One Look at Asset Growth

Adam Rust's picture

Posted December 10, 2009

I made a map that compares the number of tax filers who used a refund anticipation loan with the number of tax filers who made an IRA contribution, on a county level, for North Carolina in 2006.

It is possible that a filer might do both.  I cannot account for a double counting. I do not think that there were many instances of double counting, though.  That is due to the nature of who gets a RAL.  RALs (refund anticipation loans) generally go to filers who have very little in the way of liquid assets.  They are not the kind of people who can afford to put money away for forty years.  Heck, their decision to use a RAL tells us that they can't even wait 9 days to use their money.

The two smaller maps, in the insets, show the distribution of poverty and wage income.  Poverty is on the left, wage income on the right.  The poverty map counts the percent of households in poverty.  The wage income map shows the percentage of households with wage income.

Looking Closer at the News from PCBC

Adam Rust's picture

Posted November 13, 2009

Just listening to Tuesday's investor call with Pacific Capital Bancorp's (PCBC), following on their quarterly filing.

  • Bad loan to deposit ratio is 97 percent
  • $200 million in new brokered deposits.
  • tier one - below 9 percent
  • total risk-based capital ratio is below regulator requirements
  • $8.9 million impairment on investments on lihtc projects, or sometimes referred to as CRA investments. $2.7 million in fdic insurance.
  • net interest margin drops 60 basis points.  Invested in low-yielding assets in order to get liquidity, according to CFO Stephen Masterson.  Pacific Capital CEO George Leis says that liquidity is good, but of course, it is thwarting net interest margin.

The Tax Prep Market is going to H&R Block

Adam Rust's picture

Posted November 6, 2009

In the next year, look for H&R Block (HRB)to pulverize its competition for retail tax prep.  Fundamental changes, going on this week, will impact the tax prep marketplace.  It will be one of those disruptive events that should make winners  out of Block, and losers out of Liberty Tax Service and Jackson Hewitt.

The unknown is how JP Morgan will respond.  They are already in the RAL business with a lot of the independents.  Even so, tax season is about two months off.  Can they come to terms with Jackson Hewitt and Liberty Tax?  Can they reach an agreement in time for this year's tax season?

How RALs Drive Tax Prep Services

The tax prep chains draw in customers based on two things: the quality of their tax prep service, and the availability of advances on expected tax refunds.   In today's market, tax prepares must provide loans, or really 9 day advances - on tax refunds.  For the kind of consumers that flock to strip-mall tax places, that refund is the payola of the year.  It can often be as much as $2,000 for a family making approximately $40,000 per year.

Refund anticipation loans are a sizeable chunk of income for tax prep chains.  The chains take about 10 percent of the

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