NEW YORK (MainStreet) – H&R Block (Stock Quote: HRB), the world’s largest tax preparation firm, announced Monday that it would no longer offer refund anticipation loans, which allow customers to borrow money against a future tax refund when they file their return. The move comes after HSBC (Stock Quote: HBC) – which previously provided the loans in an exclusive relationship with H&R Block – was told by the Office of the Comptroller of the Currency (OCC) to stop offering the loans.
Refund anticipation loans have been a point of contention between HSBC and H&R Block in recent months, with the tax prep firm suing HSBC in October to force it to continue offering the popular loans for the upcoming tax season. While H&R Block said in a statement that the two companies had reached an agreement on their dispute, the regulatory directive from the OCC nullifies both the agreement and HSBC’s exclusive right to offer such products.
For now, H&R Block has not announced any new partnership that would allow the tax services firm to offer the loans in 2011. But consumers who can’t wait to receive their check from Uncle Sam aren’t completely out of luck. The company’s biggest rival, Jackson Hewitt, entered into an agreement last week with the Republic Bank & Trust Co. that would allow it to offer customers refund anticipation loans for the impending tax season.
Still, customers eager to get an advance on their tax refund may want to think twice about a refund anticipation loan. The short-term loans have come under fire for their fees and sky-high effective interest rates, which cost borrowers more than $800 million in 2008. While some truly desperate taxpayers may have no choice but to accede to such unfavorable terms, those who can afford to wait two weeks for their refund check will ultimately find themselves with more money in their pockets.