H&R Block had reached an agreement with its bank to provide refund anticipation loans for the upcoming tax season. But that agreement was wiped out by the Office of the Comptroller of the Currency which has barred HSBC from providing funding for both RALs and refund transfers. The decision gives Block's competitors Jackson Hewitt and Liberty Tax a big advantage in the upcoming tax season as both will be offering refund loans.
The OCC action leaves consumers with the prospects of few RALs and much smaller RALs available. Republic Bank, which is providing funding to Liberty and which will fund RALs for 90 percent of Jackson Hewitt's locations, has announced that the maximum RAL will be $1,500.
It was the third bank knocked out of the tax business by regulators. Late in 2009 the OCC pushed Santa Barbara Bank & Trust out of the RAL business. The bank spun out that business to private investors to operate as Santa Barbara Tax Products Group. Backed by Meta Bank, that company had been expected to offer RALS this year, but it was forbidden to offer tax products without prior approval of the Office of Thrift Supervision.
HSBC and Block had reached an agreement that settled a suit initiated by Block when it said the bank had failed to take steps that would ensure a RAL program, which Block said was required under the contract. A prepared statement by Block said the parties had agreed HSBC would fund the RAL program during the 2011 tax season, but Block was to cover all borrower defaults.
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