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Refund Anticipation Loans

JP Morgan Chase is Exiting the RAL business!

Adam Rust's picture

Posted April 27, 2010

JP Morgan Chase has just given word to the Community Reinvestment Association of North Carolina that it will be exiting the refund anticipation loan business. CRA-NC heard the news through their RAL department.  In a separate e-mail, the news was confirmed by a CRA officer at Chase.

The new direction will be effective immediately.

This is a huge decision. Chase supplied refund anticipation loans to approximately 13,000 independent tax preparation firms. BankTalk has discussed how well those partners followed the law. Suffice to say, Chase is probably averting a near-term public relations disaster by moving on without RALs.

Going forward, the playing field for refund anticipation loans is narrowing. H&R Block will continue to have a funding stream for RALs

SRI Responds to Fair Lending

Adam Rust's picture

Posted February 25, 2010

There are four important votes coming before shareholders of banks and financial services firms during the upcoming annual meetings.

Calvert will ask shareholders of BB&T and Capitol One to evalute "overdraft policies and practices and the impacts these practices have on borrowers."

Christian Brothers Investment Services will ask shareholders of Cash America, a large payday lender, to adopt a policy that ends payday lending.

The Community Reinvestment Association of North Carolina is asking shareholders of JP Morgan Chase to "cease its current practice of issuing Refund Anticipation Loans."

Confirmed: RALs Over for River City and Perhaps for Republic

Adam Rust's picture

Posted February 24, 2010

The FDIC is shutting down refund anticipation loans and refund anticipation checks.

I just spoke to a source at River City Bank in their tax group. I asked him if could confirm that the FDIC told River City that they had to stop making refund anticipation loans.

"Yes," he said, "it is true."


"As far as we know, they are acting against the third party relationships.  They are concerned with tax preparers, as opposed to bank personnel."

He was clear that the timing was not specific, and that RALs could very possibly remain available through next tax season.

"It is unofficial", he said. "We're hoping that they will let us go one more year, but after that, that is how it is looking at this point."

I pressed him to say if this would be the case for other banks.  Would it be the case for Republic?

"Yes," he said, "unofficially, that is the case."

IRS Takes Action on Tax Preparers

Adam Rust's picture

Posted January 4, 2010

The IRS is going to make sure that the person you pay to file your taxes is accountable, competent, and within the guidelines of the law. The new rules, announced this afternoon, will focus on all paid preparers, save for attorneys and certified public accountants. They will also extend to tax prep software such as H&R Block's At Home or TurboTax.

Going forward, tax preparers (except CPAs and attorneys) will have to register. The IRS will require 15 hours of training, annually, to registered tax preparers. They will have to pass competency tests and re-register every three years.

Why This Matters

Some people have already poked fun at these rules. That ignores the hard facts on the ground. While most tax

The Final Frontier: RAL meets Payday

Adam Rust's picture

Posted December 17, 2009

MetaBank has stepped in to fill the void that might be created if Pacific Capital (Santa Barbara Bank & Trust) is no longer able to fund refund anticipation loans (RALs).

This is a development with two main impacts.  First, it guarantees that financial problems at Pacific Capital will not prevent Jackson Hewitt from offering refund anticipation loans this year.  Second, it provides a line of credit to refund anticipation loans with high interest rates.  The rates, by MetaBank's own calculation, are 150 percent APR.

In a brief reference on their latest 10-K, MetaBank makes reference to a pilot program that began this spring to fund RALs for "a major tax preparation firm."

During fiscal 2009 the Bank participated in tax refund anticipation loans with a major tax preparation firm after participating in a test program with that firm in fiscal 2008.

The major tax preparer is Jackson Hewitt (JTX).  Jackson Hewitt, it turns out, was not going to be left holding

Tremors at Pacific Capital

Adam Rust's picture

Posted December 15, 2009

The departure of a senior C-level official at Pacific Capital prompts speculation that the bank is on the verge of a shake-up.  Stephen Masterson, who serves as both Chief Financial Officer and Chief Operating Officer, announced on Friday last week that he will resign, effective March 12, 2010.

Masterson's replacement was not named.

Pacific Capital has been the subject of some internet rumors that suggest it might be acquired by a number of West Coast banks. Pacific Capital has some valuable branches and a long-standing role in its local communties. In that scenario, Pacific Capital's shareholders would see some value for their existing shares.

Another possibility is that the FDIC might seize the assets of PCBC. Shareholders would be out of luck.  Indeed,

Handy Fact Sheet on Refund Anticipation Loans

Adam Rust's picture

Posted October 14, 2009

5.8 million – RALs made by the three largest RAL providers in TY 2006:

  • Jackson Hewitt – 1.3 million
  • Liberty Tax Service – 0.3 million
  • H&R Block – 4.0 million

Corporate investors: Pacific Capital Bancorp, Republic Bank & Trust, JP Morgan Chase Bank, River City, and HSBC.

8.67 million: Number of RALs originated in TY 2007:

$901 million:  Fees on RALs originated during that year.

$336 million: Additional money spent by taxpayers on the new refund anticipation check product.

Three to Nine Days: time saved by getting a RAL, as opposed to using IRS e-file service.

Hard to Make Bank in Santa Barbara, eh?

Adam Rust's picture

Posted June 24, 2009

Pacific Capital Bancorp uses its tax refund business to offset its poor performance in wealth management and community banking.

That should tell you something about how much confidence a person ought to have in their management.  Remember, Pacific Capital Bancorp is located in Santa Barbara, California.  That's a pretty nice address.  There are a lot of deposits in that neighborhood.

In spite of the advantages that would be conferred upon a bank that serves


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