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KANSAS CITY, Mo. (
H&R Block(HRB) hit a new 52-week-low on Monday after it said it is suing
(HBC) U.S. arm if it does not offer refund anticipation loans as tax season approaches.
H&R Block filed a complaint on Friday in the U.S. District Court for the Eastern District of Missouri for injunctive relief against HSBC Bank USA, and certain affiliates, according to an
Securities and Exchange Commission filing.
H&R Block wants to require HSBC to perform its "contractual obligations under the HSBC Retail Settlement Products Distribution Agreement, dated as of September 23, 2005, as amended," the filing said. Apparently the contractual obligations include offering the popular refund anticipation loans, according to
If HSBC does not make the loans available in the next two months, H&R Block will not be able to offer the products, the article says.
According to one analyst cited in the article, not offering the products would be a "material" hit to H&R Block's revenue and profitability.
H&R Block shares plunged as much as 13% on Monday to $10.76 on strong trading volume of about 20 million shares, at last check.
The two firms did not comment to
Refund anticipation loans have been a point of contention in the tax preparation business. Some critics have said the practice is an example of predatory lending.
The inability to offer inability to offer the products this year "would damage or destroy Block's relationships with the millions of clients who desire them, would injure Block's reputation and customer good will, and cannot be remedied by mere monetary damages," the suit said, according to
Dow Jones. The suit would apparently give advantage to its competitors,
Jackson Hewitt(JTX) and
Intuit(INTU - Get Report), among others, who do offer the loans, it said.
H&R Block is another financial firm that was hit hard by the housing downfall. Prior to the crisis, H&R Block owned a subprime mortgage lender, Option One. Option One's credit troubles put H&R Block in a tailspin once the housing crisis hit and put the business up for sale. It was originally supposed to be bought by
Cerberus Capital but the firm rescinded its offer. Wilbur Ross ended up acquiring the servicing business.
H&R Block further retrenched by selling its financial advisors unit to
Ameriprise Financial in 2008.
--Written by Laurie Kulikowski in New York.
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