H&R Block says it is dropping its controversial but lucrative tax refund loan program for good.
The country’s No. 1 tax preparer said yesterday it was dropping its Refund Anticipation Loan, or RAL, program because business was robust and it couldn’t find a “compelling reason” to bring back the much-maligned program.
But in a regulatory filing last June, the company said it no longer offers RALs because no bank will back them up anymore.
H&R Block once rang up revenue of $1.5 billion a year from interest and fees from customers desperate for quick cash from tax refunds.
It already had temporarily halted the practice for the 2011 tax season when banking regulators last December pressured HSBC, the bank that financed the RALs, from underwriting them anymore.
“Knowing we had a strong 2011 tax season without RALs, our analysis did not present a compelling reason to bring back the product in 2012,” said Bill Cobb, H&R Block president and CEO.
Next year, H&R Block said it will instead provide refunds to customers through a debit-styled card that will be loaded with a Treasury refund check, minus customary filing fees, and carry the balance until it’s drained out by customers at ATMs.
H&R Block said in regulatory filings that the new card product “is not a loan,” and would allow refunds to be loaded onto the card as “Refund Anticipation Check” so that customers who don’t have checking accounts can accept their electronic Treasury check.
Apart from the HSBC freeze-out, the hardest blow came a year ago when the IRS ceased providing the confidential codes disclosing whether a RAL borrower had liens for back taxes, child support or student loans. Without codes, lenders faced a risk of losing their investments to other lien holders.