H&R Block Blocked from Refund Anticipation Loans
In August, the IRS announced that it would no longer tell tax preparers and associated financial institutions when a consumer had a "debt indicator" that the consumer's tax refund would be offset against past due debts such as unpaid child support or delinquent student loans. The IRS move increased the repayment risk for those high-priced refund anticipation loans (RALs). Now comes news that the Office of the Comptroller of the Currency (OCC) has directed HSBC to terminate its contract with H&R Block to provide the financing for RALs.
The market's move also hints at how important the availability of RALs are to bringing business in the front door. Even before today's news, the stock prices of both H&R Block and Jackson-Hewitt had dropped over the year as RALs came under increasing regulatory pressure. I used to think of these firms as tax preparers with a high-priced lending product attached to them. Now, I wonder whether they have not become high-priced consumer lenders with a tax preparation service attached.