Steve Trager piix

For those who thought refund anticipation loans were too expensive, they are going to get more so during the next filing season. That was the message of Steve Trager, CEO of Republic Bancorp, who this week told investors that Republic Bank would likely issue fewer, more expensive refund loans because of the decision by the Internal Revenue Service to stop providing the debt indicator.

Trager spoke at this week's Rodman & Renshaw Annual Global Investment Conference, about the impact of the IRS decision not to provide the debt indicator  which has been used in measuring the risk of giving loans to applicants. He said that despite the IRS decision, there is a lot of demand for RALS, but relatively few banks to fund the loans.

"We'll offer less RALs for less dollars for greater fees,"  Trager said in a Webcast. "We are comfortable we can underwrite to accomplish that."

That would reverse a trend over the last few years for loans to get less expensive. Last season, Republic RALs averaged about $3,400 with a typical cost of $58 for that size loan. The company did a good job in reducing the uncolletible amounts from 1 percent of the 2009 voume to under half a percent this year, Trager said. He noted the bank hires about 450 seaonal worker for the tax season business.

Banks used the debt indicator, which showed if a taxpayer had any federal obligations that would be applied against refunds, to reduce underwriting risk. H&R Block has said it expects the IRS decision will cut 5 cents per share from its earnings fo the current fiscal year.

Trager said the underwriting is already complex with Republic using about 58 criteria to evalute loan applications.


Last modified on Sunday, 02 June 2013
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