HRB is relying on this section of the contract:
(e) All of the Block Companies or all of the HSBC Companies may terminate this Retail Distribution Agreement and any other Program Contract (other than the Servicing Agreement) in the event that the offering of HSBC RAL’s pursuant to the Settlement Products Program becomes commercially infeasible due to a change in Law (other than the removal of the Debt Indicator) that creates a Material Adverse Effect.
HSBC is relying on this section of the contract:
HSBC Bank shall not establish credit criteria for any other tax preparer for whom it makes refund anticipation loans that are less restrictive than the Final Credit Criteria.
This contract was written in 2005, and at that time it had a lot more tax preparation companies that it provided RALs for. HRB is the only one now, and they want out. Publicly, all HSBC has said is that we have not worked out the credit criteria, yet. Anyone ever worked with a bank that didn't want to make a loan, even if all of the proper elements were there?
OCC issued a bulletin in February which indicates how they are going to look for when they audit the RALs. Chase exited soon, thereafter. HSBC obviously wants no part of it. In a nutshell, HSBC is bigger and owns all the marbles.
Your analysis hits the nail on the head. As long as HSBC does not offer anyone else better credit criteria, it can fulfill its contract with HRB without doing a whole lot. For example, it can require a credit score of at least 720 to approve a RAL. How many of those do you suppose there will be?
It is very difficult to force a business partner to do what you want them to do when they want nothing further to do with their business relationship with you. Block will offer a RAL product this year, but they will not be promoting it. Their approval rating will be very very low, but that will not be discovered until the return is prepared and efiled. When it flips to a RAC, the customer will be unhappy but stuck for this year. So the effects of this will not show up until the 2012 filing season for the most part. By that time, word will be on the street that nobody gets approved at Block.
That is probably okay with the current management team since anything beyond the next quarter doesn't exist to them.
Yes, they are not offering the RALs this year. Most RALs will be declined anyway because the banks will be paranoid without the debt indicator.
They should ban all RALs anyway. Taking advantage of low income wage earners and pocketing part of the EIC money they so desperately depend on.
Taking advantage of low income wage earners (lloyd)
Here we go again!
How do you take advantage of someone who demands the product? Maybe their rent is late and they have to pay a $75 late fee. Maybe their utility company is going to shut off the lights…. Maybe they just want to feel the dollars in their pocket and go to the movies this Saturday with their friends, not next Saturday alone.
I do so few RALs, if they disappeared I wouldn’t notice. My busy time is March & April. My clients have corporations, and partnerships & business returns. BUT to stay competitive & satisfy some clients I need RALs on my menu, if that’s what they want. I’m here to serve, not judge!
I do NOT want apple slices with my burger, darn that Burger King taking advantage of my weakness like that!
I totally agree with what you are saying. I do wish that before the IRS decided to pull the debt indicator, that they would have established some form of criteria that paid prepares fees would be withheld from refunds. That is a huge reason that clients do RAL's or RAC's. Most of those taxpayers do not have checking accounts yet alone savings accounts for direct deposits. Many of them are continually moving from either their apartments to their cars, or foreclosed homes to grandmas where checks may not catch up to them. I personally do not believe in the RAL product but understand why taxpayers are so desperate to receive their refunds as soon as possible.
Because rals are a sleazy business practice and block must really dislike it's customer base to offer these low-end products at outrageous rates (i.e. predatory lending.)
If block really valued it's customers (like a small cpa or ea practice), they would perform planning and offer guidance to provide more balanced (lower) refunds through reduce withholdings, advanced eic, etc.
Actually, most of Liberty and JTX's returns do not involve RALs. And with JP Morgan Chase pulling out, not a small player, there is a very severe shortage of capacity in the system for RALs next tax season. In five years there will be no such thing as a RAL as we know them today. The company that best adapts to that fact will be the most successful.
You need to calm yourself, take a pill, and stop calling people liars. You can barely write a coherent sentence and when you do it reflects that you haven't a clue. Provide a quote where I said the tax products division of SBBT wasn't sold. But you're clueless as to how difficult it is to find several billions of dollars in today's credit market to fund RALS. It has nothing to do with poor people who can't afford to pay up front. They have the RAC. Do you even know the difference? Doesn't sound like it, it just sounds like you are clueless but like to sling mud calling other people liars. That's a real sign of dementia, you know...
I will tell you what is disturbing you tell have truths sound like a democrat to me. The bank was sold no doubt about it and was told they couldnt do rals now there was something wrong with the holding company for that bank and the regulators made them sell that off. You said in previous statement that the bank was not sold, which is a lie. Why were they sold was never brought up they were sold. Now I do tax,s. I just like you am not a banker. That is not what I do, and for the finance,s I leave that up to the firm where I invest my money. There may me a struggle for rals in the future but common sense will tell you that there are banks holding companys anyone that has lots of cash that will fill this need, and if not do you think tax returns will be filed by poor people that cant afford to pay upfront or maybe racs or different where that wont be regulated. If there is no rals company like jtx and liberty will be hardpressed to stay open since most of their tax returns involve rals. I think most of the jtx and liberty are franchises and their parent company take in only about 20 percent of the tax prep charges and mostly where they got thier money was off of ral fees given to them by the banks. With that in mind dont you think someone will step in and to provide those rals.
Louie, nobody said that bank didn't sell its tax financial products division. What I disputed was your statement that "jackson lost thier bank do to the bank being sold and the other bank that bought them would not let them do the rals". That statement is not true. The bank was told they could not do RALs by the Comptroller of the Currency. It was their decision to sell rather than close the division. SBBT provided no RALS last year. It is not a "leading RAL provider". JTX lost its RAL because the feds shut down its bank, who sold their tax funding products division and the new entity could not find financing of several billions of dollars to do the RALs. It's quite simple, but not at all how you are describing it.
You obviously can't follow what caused what in this scenario. Honestly, that's very disturbing from someone who does taxes.
SBBT was forced to stop providing RALs after its parent company, Pacific Capital Bancorp, was ordered by the Office of the Comptroller of the Currency to sell its E-Filing Financial Services Division to meet bank capital requirements.
SBBT has provided RALs and refund transfers for many other tax prep firms around the country, and is one of the leading RAL providers, along with Republic, Chase, and River City Bank. The tax division reportedly will be acquired by a private equity firm and will be renamed Santa Barbara Tax Products Group.
They were sold period for whatever reason they got sold which jtx in a big bind
JTX didn't lose their bank because it was sold, they lost their bank because the federal regulators shut them down and JTX had not made any responsible contengency plans for what they would do if that happened.
Are you aware that Chase, the main bank providing RALs for independent tax offices, has pulled out? Where do you think those businesses will go for RALs next tax season? That's 13,000 tax offices that are scrambling for a RAL source. The other RAL banks are already at their full capacity, given the funding resources they have available to them. At the moment, Liberty and HRB are the only national companies that can service all their customers with RALs. Major consolidation is going to take place, and many independents will be converting to Liberty offices, or else trying to make it without RALs. HRB won't take on many of those independents because they already have tax offices that are conveniently located for 95% of the U.S. population. They can't expand locations much.
I hate to say this but jackson lost thier bank do to the bank being sold and the other bank that bought them would not let them do the rals you might be right about tax company offering rals i am not up on that but it wouldnt be the irs doing that it would be due to bank rules and regulation not the irs. the irs do not make laws they just enforce the rules and laws made by congress they are the only ones who can make laws not the irs. About
Banks I know there are less of them today than there were a couple of years ago but do you think that there are not banks out there that wont get into ral,s. I suspect banks there were helped out in the tarps handouts might have a problem but banks that didnt get any tarp shouldnt have any restrictions except for the new banking laws that might be passed in the bill that congress is about to pass. I have not read it and it isnt final yet. Rals are way too profitable to be left out. Any comapany with deep pockets would like to get into this. It has lots of profits with it and the only drawback would be the IRS if they refused to say if there is any offset.