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Refund Anticipation Loans

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

Wells Fargo Stands by Jackson Hewitt

Adam Rust's picture

Posted December 20, 2010

Wells Fargo extended its line of credit to Jackson Hewitt on Friday.

In an 8-K released after the close of trading, Jackson Hewitt announced that Wells agreed to renew their commitment to the tax preparation franchise. The new loan includes a few interesting provisions:

  • At any time, Wells can demand that Jackson Hewitt repay $25 million at any time between April 4th and

Unbanked Notes

Adam Rust's picture

Posted December 8, 2010

  • Green Dot sold 4.27 million class A common shares, pricing at approximately $61 per share, on Tuesday. The sale was their second public offering this year. They sold about 9 million shares in June, with a price of about $34.
  • A former Jackson Hewitt service manager was convicted this week on charges of falsifying the tax returns of her clients. The U.S. Justice Department said that she filed 20 returns that "she knew were false." The changes cost taxpayers $165,000.
  • In their most recent annual report, EZ Corp (EZ Pawn) reported that revenues increased 22.3 percent. Their auto lending segment, which derives revenues from fees on car title lending, increased revenues sixfold. Car title lending is only legal in about half of the US. EZ

Analysis: Arkansas AG Suit against Mo' Money Taxes

Adam Rust's picture

Posted December 8, 2010

I have obtained a copy of the complaint (pdf) prepared by Arkansas Attorney General Dustin McDaniel against Mo' Money Taxes, its successor MoneyCo, and the principal owners of the firm.

The complaint alleges violation of Arkansas' Refund Anticipation Loan Act ("RALA") and the Arkansas Deceptive Trade Practices Act ("ADTPA").

Mo' Money ceased to exist on August 8th, 2010. Since then, Mo' Money c0-owner Markus Granberry has established a new company, known as MoneyCo USA. It has its headquarters at the same address as Mo' Money Taxes. On MoneyCo USA's web site encourages people to return to

Arkansas Files Lawsuit Against Mo' Money Taxes

Adam Rust's picture

Posted December 7, 2010

Arkansas Attorney General Dustin McDaniel filed a lawsuit on December 6th that indicts Mo' Money Taxes of violating the state's 2009 Refund Loan Anticipation Act.

Earlier this year, Mo' Money Taxes decided to voluntarily return its North Carolina refund loan license after the state pursued a claim against the Memphis company for failing to observe state rules requiring disclosures in company offices.

The Arkansas suit alleges that Mo' Money broke two rules. First, the AG says that MMT failed to post required disclosures in its stores. The law says that pricing for refund anticipation loans has to be clearly displayed.  Secondly, the AG says that they put additional charges on the loans. The RAL act states that the only charges allowed are bank fees.

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.

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.

Is the Market Wrong about H&R Block?

Adam Rust's picture

Posted November 1, 2010

Could the market be overstating the problems at H&R Block?

H&R Block shares gave up fifteen percent of their value after the company released an 8-K on October 18th with details about HSBC's resistance to honoring the contract between the two companies to facilitate refund anticipation loans. The all-knowing "Market" seems to have been on to the situation even earlier, as

the shares had dropped another 15 percent in the prior week.

This is a big drop for a company facing the loss of a product that contributes only 4.9 percent of revenue.

One unstated cost for Block is the ongoing impact that refund anticipation loans pose to their reputation. In 2005, two academics and a Block AVP published a case study on Block's RALs. They asserted that costs from "non-consumers" threaten the entire model.

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


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