H&R Block may not be able to offer Refund Anticipation Loans (RAL) for 2011 tax season

Last week H&R Blocks stocks plummeted to the lowest they’ve been since 2001, after news that the national chain may not be able to offer Refund Anticipation Loans (R.A.L.) for the upcoming tax season.  More recently the stocks are teetering up and down as news about their legal dispute with H.S.B.C., the bank they use to offer Refund Anticipation Loans, continues to be discussed.

The shares have fallen 52 percent this year, the worst in the Standard & Poor’s 500 Index.                                                                              – David Scheer, Bloomberg.com

All of this began when the Internal Revenue Service announced that they will not issue debt indicators to banks anymore.  The debt indicator would notify the bank  when taxpayers qualify for refunds claimed on their tax forms.  Without this indicator some banks are finding that offering Refund Anticipation Loans may be a little too risky.

“Absent performance by HSBC during the next two months, Block will not be able to offer these products” during the 2011 tax season, Kansas City, Missouri-based H&R Block said in an Oct. 15 lawsuit…                                                          – David Scheer, Bloomberg.com

H.S.B.C does not want to uphold their contractual obligations and allow H&R Block to offer Refund Anticipation Loans for the coming tax season and this will seriously impact their ability to maintain client relationships with taxpayers who choose to use these products.

H&R Block said it cannot find a comparable alternative source of financing for these products at such a late date…

For its most recent fiscal year, which ended April 30, H&R Block reported $146.2 million in revenue from loan participation fees and related revenue. About 40 percent of its tax preparation clients bought a settlement product in fiscal 2010.                                        – James Dornbrook, Kansas City Business Journal

R&G Brenner will continue to offer  bank products including Refund Anticipation Loans* for the coming tax season 2011.  We do not suggest the use of these products as the interest rates are exorbitant, however we understand that our clients want the ability to choose from several options when submitting their tax returns.  Though the I.R.S. changes have made it increasingly difficult to offer these types of products, we strive for customer satisfaction and continue to provide the options our clients desire.

Sources:  Bloomberg.comKansas City Business Journal

* loans offered through Republic Bank