
H&R Block Shares Drop After HSBC Contract Nixed
KANSAS CITY, MO. (
) --
H&R Block
(HRB) - Get Report
shares plunged on news that
HSBC
(HBC)
will not resume offering refund anticipation loans (RALs) to the tax preparation firm's clients as the tax season gets underway.
The Office of the Comptroller of the Currency has apparently prohibited HSBC from offering refund anticipation products. H&R Block said in a statement on Friday that HSBC has told the tax preparer that it is "immediately terminating the parties' long-term contract under which HSBC provided all of H&R Block's refund anticipation loans and some of its refund anticipation checks."
As part of the termination, HSBC's exclusive right to provide the refund anticipation products has also ended. H&R Block can now enter into other partnerships for financial products that were previously precluded, it said.
H&R Block will supposedly continue to offer customers refund anticipation checks. The products do not require any out-of-pocket costs by clients at the time the tax return is filed, the company said.
"As a result of the OCC's decision, millions of taxpayers will be deprived of credit, or they will be forced to use higher-priced alternatives, without the slightest benefit to the solvency of HSBC or the banking system in general," H&R Block's CEO Alan Bennett said in a statement.
"While we are very disappointed by this decision, we have been preparing for the loss of RALs, so we have several other financial products available and under development for this tax season," Bennett added. "We are working around the clock to give our company and franchise teams the best tools we can to fill the void for our clients created by the OCC's action."
H&R Block and HSBC had reached an agreement in November that would have allowed
to honor its contractual obligations to H&R Block during tax season 2011.
Under revised terms of that agreement, H&R Block would have in effect covered essentially all credit defaults experienced by HSBC. The proposed new terms would have made it nearly impossible for HSBC to suffer any financial losses, H&R Block said.
H&R Block shares were down 7.6% to $11.72 in the first hour of trading. Roughly 5 million shares have changed hands. HSBC shares were falling 0.8% on the New York Stock Exchange to $51.04.
--Written by Laurie Kulikowski in New York.
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.









