H&R Block's refund loans hit regulatory hurdle (Blocked)

[Ruby the Liberal]

Source: Reuters

BANGALORE (Reuters) – H&R Block Inc, the largest U.S. tax preparer, said it will not be able to help customers borrow money against their tax refunds in the coming months, as the bank that was supposed to provide the loans is under a regulatory directive not to. An inability to offer refund anticipation loans is a big blow to H&R Block, which relies on such loans to attract clients.

H&R Block's shares fell as much as 10 percent in morning trade on Monday. The stock has fallen 39 percent this year, following regulatory uncertainty concerning refund loans.

Banking regulators at the Office of the Comptroller of Currency (OCC) told an HSBC Holdings unit not to offer refund anticipation loans to H&R Block customers. U.S. regulators have been cracking down on refund anticipation loans, which according to consumer advocates carry unduly high interest rates, and HSBC had tried to avoid offering them this year, spurring H&R Block to sue the bank in October.

But some competitors still offer the loans. Jackson Hewitt Tax Service Inc, the second largest U.S. tax preparer, said earlier this month it could fund 80 percent of its refund anticipation loan program. Jackson Hewitt shares surged more than 38 percent as it is expected to get more business from H&R Block's inability to offer refund loans.

Read more: http://news.yahoo.com/s/nm/20101227/bs_nm/us_handrblock

[Sherman A1]

1. My first thought is

Good. These were just more loan sharking, in my opinion.

My second thought is that there are probably cases when folks really need the money right away, so they may not be completely useless.

[Ruby the Liberal]

2. Agreed. It is the usury rates that caught my attention.

Payday loans are still in vogue, but apparently tax refund usury is starting to catch the attention of the regulators.

If these people want to stay in business, they can charge a nominal rate. They will still make money, and if they handle it right - can save face.

Something tells me that they will fight it tooth and nail and perhaps find another financing arm so that they can keep the stockholders happy, with no regard to the long term viability of the firm.

[unblock]

3. exorbitant rates for payday loans are odious enough, but for tax refunds it's particularly rotten

high rates on payday loans are taken advantage of unfortunate private situations.

but tax refund loans are taking advantage of a situation that the government had a large part in creating, by setting up withholding rules that strongly encourage people to over-withhold because they'd rather give refunds in april than collections notices in august. if the withholding tables made the average refund in april much smaller, the entire industry would vanish.

[Ruby the Liberal]

5. No kidding. The fear of owing vs the few bucks out of the check

seems like a no-brainer until you realize you are giving the Govt an interest free loan all year.

There has to be an easer way that benefits those of us at the lower end of the scale from this nightmare - and no, I am NOT advocating a flat tax. I don't know what I am advocating.

[unblock]

9. personally, i carefully predict my taxes and file estimated taxes quarterly

my employer actually takes nothing out.

i would NOT recommend this for most people as it requires rather a lot of discipline. you not only have to keep up on the tax laws and know your own tax liability, but you have to set aside the money throughout the year so you can make each payment.

but it does mean i get the interst throughout the year and owe VERY little in april for the previous tax year (although i do have to write a big check for the first estimated tax payment of the new year at the same time.)

[Hawkeye-X]

11. I'm caught in the payday trap, but fortunately found a lender willing

to "stretch it" for extra $50/month. They have since stopped accepting applications and no new loans.

So once the trap is over, I'm done with payday loans - I don't need it, I'm flush on money..

[justabob]

8. yeah, it sucks

I was in H&R Block today trying to do this(unsuccessfully). I have no job and 100 dollars until I can file my taxes. It is frustrating because I will have my wretched w2s in a couple of weeks and be fine, but until then, I am SOL. Sigh. The charges and fees etc ARE outrageous, but if you have no other alternatives....

[TheMadMonk]

17. I'll gladly pay you Tuesday for the hamburger I eat today.

Your first opinion is the correct one.


ANYONE might find themselves in a position where anticipated monies due in a few months time could be useful (or even critical) right now.

People who spend those anticipated monies (or simply desire to) in advance of their being realised get no sympathy from me.

[GReedDiamond]

4. I used H&R Block once, probably 10 years ago or more...

...they were fucking horrible and useless. I didn't do the "gimme my refund up front" thing -- if they were even doing that then, I don't know -- I just had them figure my taxes.

I had done them myself before and done a better job.

[Ruby the Liberal]

7. With TurboTax and other such problems, taxes are SO much easier today.

My taxes are very uncomplicated (no rentals, etc) and my small family has nothing but retirement and a few expenses. The program prints up everything beautifully for our records and files electronically. Refund in about a week.

I wish I could figure out how to just set up a temporary service doing that for people who need their funds quick. Hell, some 68% of people file short form. Why on earth should they have to pay usury interest when they could get a check in a week?

[GReedDiamond]

10. Back then I wasn't, but for some time now, I'm self-employed...

...it became too complex/scary for me...I've had a great tax guy for a long time now.

I'm with ya on the usury interest thing.

[Ruby the Liberal]

12. Self employment is a whole new bag of beans

What with the laws changing seemingly every other year. If my taxes were any more complicated than W-2, a handful of deductions and some mutual fund dividends, I would head straight for a CPA. Too confusing to try to keep up with very year unless you are in the business.

[lonestarnot]

6. Good!

[customerserviceguy]

13. This is going to hit them hard

The ONLY reason people go to H&R Blockhead is for the quickie refund loans, often it's their refundable credits that they're getting back, which they're too sheepish to claim from their employers as an advanced credit.

Anybody with half a brain uses TurboTax, etc. I know, I worked for Blockhead for one tax season back in 2005. It was the only job I could get in Utah without being a Mormon.

[Ruby the Liberal]

14. They paid you for one tax season?

I hate to ask what training they provided?

[customerserviceguy]

15. In my case

It was a week's worth of training, but since I had my own tax practice back in Washington (I used to be an enrolled agent) it was relevant only in how it taught me how to use their software.

It was sort of like a Porsche mechanic walking into a Jiffy Lube looking for a job, of course they'd hire him, since it didn't matter that he was overqualfied. In fact, being non-Mormon, it sort of all balanced out.

[pezDispenser]

16. off topic

but can I ask what they paid? I'm considering it as part time extra work.

[customerserviceguy]

18. As I recall

it was about $9.50 an hour, but that was Utah, all the good jobs are reserved for the Mormons.