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Jackson Hewitt Hit Again

Now it pulls out of the refund-anticipation loan game.

Shares of

Jackson Hewitt


took another tumble after the tax services provider dropped out of the refund-anticipation loan business.

Jackson Hewitt said Tuesday it would make the move in response to several banks' decisions to stop offering the loans. The move comes as authorities in New York state probe loans that they say are possibly predatory and discriminatory.

Tax refund anticipation loans are short-term cash advances given to customers based on projected tax refunds. Two specific types of refund loans, known as holiday and pay-stub loans, have come under scrutiny because they carry extremely high interest rates.

The New York State Division of Human Rights said last month that it would investigate whether Jackson Hewitt and rivals such as

H&R Block

(HRB) - Get H&R Block, Inc. Report

targeted minorities and military personnel for high-interest tax refund loans.

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said on March 15 that it was discontinuing those loans. An HSBC spokeswoman said on Tuesday that the company had worked with tax preparers such as Jackson Hewitt and H&R to offer the loans.

Pacific Capital Bancorp


of Santa Barbara, Calif., also announced on Tuesday that it will discontinue the refund anticipation loans.

Jackson Hewitt stressed that it "provided these products primarily to drive customer retention" and didn't get "financial product fees" for the "facilitation of such products."

"While our decision recognizes changes in the market place, we will continue to remain focused on providing value to our customers through our tax preparation services, as well as by providing products and services that support their individual needs," says Michael Lister, its chairman and CEO, in a release.

The news comes just a week after Jackson Hewitt shares were punished on news that the Justice Department had sued a franchisee for alleged tax fraud. The government claimed that fraudulent tax returns were prepared at 125 Jackson Hewitt stores in the Chicago, Atlanta, Detroit, Birmingham, Ala., and Raleigh-Durham, N.C., areas. The suits seek to shut down the stores and force repayment of $70 million of ill-gotten gains.

On Monday, the company reached a voluntary agreement with the franchisee to temporarily suspend doing tax-return business through its offices.

Shares were down $1.28, or 4.4%, to $27.57 on Tuesday.