Where did the rapid refunds go, long time passing…

Where did the rapid refunds go, long time passing…

H&R Block Press Release dated December 24, 2010:
H&R Block says HSBC Terminates RAL Funding Pact. As a result of a regulatory directive by the Office of the Comptroller of the Currency (“OCC”), HSBC has given notice to H&R Block that it is immediately terminating the parties’ long-term contract under which HSBC provided all of H&R Block’s refund anticipation loans (“RALs”) and some of its refund anticipation checks (“RACs”). As a result, HSBC will no longer provide RALs or RACs to H&R Block clients.

Yes, rapid refunds are becoming a thing of the past. The Christmas Eve massacre cut off one of the big three at the last moment. But this is simply the latest blow in a year long campaign by the Obama administration through various agencies and a host of state attorneys general.


The biggest single blow came this off-season when the IRS announced it would not be providing the debt code indicator with its acknowledgements. The debt wachacallit, what is that? In the past, rapid refunds are actually bank loans that a tax customer paying a tax preparer would receive within 24 hours of filing a return. The loan would then be repaid when the IRS direct deposits the refund to the bank in 8 to 15 days. The tax preparer would do the return, get it signed by the taxpayer, then send it electronically to the IRS with a code sent to the bank. The IRS would then do an initial electronic evaluation of the return and send an acknowledgement that the return was accepted. Part of this acknowledgement was the debt code indicator. What this told the bank was whether a claim (ie, child support, student loans, unpaid taxes, etc) was filed against the tax refund of the taxpayer. This was obviously important information to the bank since it told the bank if this taxpayer was actually getting their refund. If not, 95% of the taxpayers applying for these loans can’t pay it back out of their own income.


The stated reason for this is that many of the providers in the industry would charge outrageous rates with APRs (annualized percentage rate) of 100-300%. I took severe issue with a local paper that printed this as gospel when “covering” the IRS funded “free clinics”. They really did a softball on them, accepted everything they said about the “bad, predator” professional tax return preparer. For my own business, I used Chase Bank. Chase capped its loans to an APR of 33%. Not bad considering a short loan period balloons the APR and many credit cards are in the 20-25% range. Also, since they were on Chase Bank checks, my clients could cash the checks for free instead of paying the real loan sharks, the payday advance places.


Ironically, I never made a lot off of the Rapid Refunds. Yes, truth be told my “take” was usually about 15-20 bucks. Considering my average return fee is about $100, not really a big deal. I only offered them because a threshold question is, “Do you offer Rapid Refunds?” A no answer and you get hung up on. But like it or not, they are a thing of the past. I will move on to other clients and survive. Darn, and I was just looking at that one house up in the Akron area built by that basketball player who moved to South Beach, what’s his name?

Another article regarding another Rapid Refund or Refund Anticipation Loan provider:


http://banktalk.org/2011/02/16/river-city-bank-drops-ral-program/