No More Refund Anticipation Loans
Fast cash from H&R Block after filing taxes is a thing of the past. H&R Block’s Refund Anticipation Loans (RALs) provided quick money for millions of Americans, who don’t have bank accounts to receive speedy tax refund direct deposits from the IRS. Since they need their tax refunds immediately, they opted to get RALs from H&R Block during the waiting period, even though the interest rates would cost them an arm and a leg. Well, now customers will need to take their business elsewhere: H&R Block announced on September 13 that it won’t offer such loans for the 2012 tax filing season. 
Refund anticipation loans are great products for lenders because they are low risk and expensive. HSBC, H&R Block’s exclusive partner for RALs last year, charged as high as a 36% annual interest rate. Moreover, despite the high fees, almost 40% of H&R Block’s clients used these loans. So why eliminate something with a fairly large customer base that the company can easily profit from? “We evaluated our options to determine what was best for our clients, the business, and our shareholders,” said Bill Cobb, H&R Block president and CEO. “Knowing we had a strong 2011 tax season without RALs, our analysis did not present a compelling reason to bring back the product in 2012.”
Cobb left out some important information. In December 2010, the IRS decided it would no longer help banks underwrite tax refund loans, due to the concern over exorbitant interest rates. In 2011, H&R Block stopped offering refund anticipation loans because U.S. regulators directed the company’s third-party lending bank, HSBC, to quit funding the product. Interestingly, H&R Block’s fiscal fourth quarter profit fell almost 4.9 % when the service was cut.
H&R Block said it still expects to provide “low-cost financial solutions” during the 2012 filing season, but didn’t specify what those solutions might be. Refund anticipation checks are a viable alternative for customers, although they don’t provide the cash as quickly as a loan. Jackson Hewitt Tax Service Inc. and Liberty Tax Service apparently still offer refund anticipation loans, but customers should anticipate saying farewell to RALs from all companies in the near future.
On the Money,
Sufen Wang
Wang Solutions
Wang Solutions 
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