And there is a lot of thinking going on about how loans could be revived. Last year, TaxWorks piloted a consumer loan program as a replacement for RALs called a Tax Season Cash Advance. The program was designed to utilize state, not federally regulated lending institutions. But the company's website does not have information about such a program continuing.

It is expected that when JTH Holding, parent to Liberty Tax, reports financial results tomorrow morning (Tuesday August 29), that Liberty will announced a loan program on a state-by-state basis, probably in alliance with Meta Financial and NetSpend. Earlier this year, John Hewitt, the founder of Liberty and CEO of JTH, said he would explore a loan program financed by institutions that are not federally chartered. It was action by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. over the last two years that drove federally chartered banks out of the RAL business.

The company expanded its cash advance program to seven states last year. However, Hewitt declined to provide details on the program or identify the lender involved in the program. "We don't want to alert our competition to what we are doing to be doing this season," said Hewitt. Details will be disclosed in a December Investor's Day.

Last week, Meta sold 1.5 million shares in stock to a number of interests, including JTH and NetSpend, which issues debit cards. The deal will give JTH a 9.9 percent of the share offering, but leave it with less than a 5 percent stake in the company. The sale was to raise $34.2 million to capitalize MetaBank. However, since that bank is federally chartered its role in any program is not clear.

Meanwhile, there appears to have been a great deal discussion among software companies and debit card providers about approaches to tribal banks, which are not subject to federal regulation. There was discussion on the floor of the Internal Revenue Service's Tax Forum in New York this week. But no one wanted to talk about the subject on the record and all viewed use of tribal banks with unease.

So the public discussion was about prepaid debits cards, direct deposit and electronic refund checks. Among the new relationships was that of Petz Enterprises., which markets the CrossLink 1040 line and RushCard, which issues the prepaid Visa RushCard.

Before a return is efiled, "we send the information to RushCard. They run back-end processes to verify the ID," says Chuck Petz, CFO of the Tracey, Calif.-based software company. The screening performs in much the same way that banks utilized underwriting criteria, particularly the former IRS debt indicator, to reduce risk of bank products. In fact, RAL proponents say one side effect of the end of loans is to remove an important layer of fraud detection.

"When there were loan products the banks were doing fraud detection. A lot of fraudsters were deterred on the front end. Now that layer of underwriting has been removed and we are paying for it," says John Sapp, VP of strategic development for Drake Software. And if taxpayers could get loans, they still would.

That leaves Drake continuing with the same bank partners it had last year: Advent Financial, Republic, EPS Financial, River City Bank and the Santa Barbara Tax Products Group, a lineup that can be found across the industry along with other providers.

There are other barriers facing bank products. Among them is a new law in Illinois that aims to keep Electronic Return Originators and preparers from piling on fees for bank products, according Shannon Bond, commercial product line manager at CCH Small Firm Services, which markets the ATX and TaxWise software lines. Any lending fee must be clearly stated up front, she notes.

And given the decline of RALs SFS is also providing the same programs it did last year. The company's banking partners as the same as  Drake's, plus Refund Advantage and eFund and SFS does not use EPS.

Bob Scott

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Bob Scott has provided information to the tax and accounting community since 1991, first as technology editor of Accounting Today, and from 1997 through 2009 as editor of its sister publication, Accounting Technology. He is known throughout the industry for his depth of knowledge and for his high journalistic standards.  Scott has made frequent appearances as a speaker, moderator and panelist and events serving tax and accounting professionals. He  has a strong background in computer journalism as an editor with two former trade publications, Computer+Software News and MIS Week and spent several years with weekly and daily newspapers in Morris County New Jersey prior to that.  A graduate of Indiana University with a degree in journalism, Bob is a native of Madison, Ind