Republic Bank, one of the few financial institutions remaining in the refund loan business, expects that in the upcoming tax season it will utilize as little as one third of the amount it borrowed to support its RAL business in the 2010 season. The statement was made in the quarterly SEC filing of the parent, Republic Bancorp. Since Republic borrowed just over $1 billion last year, that suggests its borrowings could drop to about $333 million for the first quarter of 2011. With the Santa Barbara Tax Products Group now apparently unlikely to offer refund loans, the will be little money to meet expected demand. The dramatic drop was linked to tighter underwriting standards the company has adopted to counter the effect of the decision by the Internal Revenue Service not to provide the debt indicator. Lenders had utilized that tool as one of the factors in deciding if prospective RAL recipients would be receiving the full amount of tax refunds they anticipate.
To counter the impact of the IRS decision and keep earnings at the same level, Republic says it is increasing prices for products from its Tax Refund Solutions and would significantly reduce the amount each taxpayers can borrow.
One of the company's with the biggest problems in receiving RAL funding is Jackson Hewitt Tax Services. After Regulators forced Santa Barbara Bank & Trust out of the business, Jackson Hewitt was able to get only 50 percent of its RAL volume funded and it has the same commitment for the 2011 tax season. The agreement with Republic covers the tax services company's locations in Arkansas, Florida, Indiana, Kentucky, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Texas and Virginia. Under a renegotiated lending agreement, Jackson Hewitt has until November 19 to provide its lenders with a written statement of commitments for the other 50 percent of locations.
