With the refund market appearing more and more threatened, H&R Block has sued HSBC Bank claiming that the bank, which fund's the tax preparation companies loan programs, has failed to take steps that would enable Block to provide Refund Anticipation Loans during the upcoming tax season. That comes less than a week after Meta Financial says it has to get regulatory approval for expanding its income tax-based loan programs.In a complaint filed in a federal district court in Missouri, Block alleged that unless HSBC takes certain steps in the next two months, the RAL program cannot be offered. Block says the bank must provide RALs under a 2005 contract. Block provided few details in a filing with the SEC. The tax chain is the only company for which HSBC provides funding for RALs and assisted refunds.
Rival Jackson Hewitt has already been damaged by its inability to get funding for more than 50 percent of its RALs during this year's tax season after the Office of the Controller of the Currency forced Santa Barbara Bank & Trust out of the RAL business. Jackson Hewitt has gotten the same financing from Republic Bank for half its business for next tax season. But it must have contracts in place for the other half by November 19 under requirements of its own lending agreements.
Santa Barbara's business was sold to its managers, which operates as Santa Barbara Tax Products Group. SBTPG provided funding for assisted funds this year, but not RALS. While no program has been formally announced, Santa Barbara's Web site has enrollment information for a RAL program. However, its funds are provided by Meta Bank, whose parent has been told by the Office of Thrift Supervision that it cannot increase lending for either its RALS or assisted transfer programs without that agency's written permission.
