Above the Line

FDIC moves to shut down RALs for Jackson Hewitt, Liberty

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Last year, the IRS put the first nail in the RAL coffin when it announced it would no longer feed information on taxpayer eligibility for refunds. Then early this year came the announcement by the Comptroller of the Currency that HSBC, H&R Block’s provider of RAL loans, was not permitted to, and thus wouldn’t, offer RAL loans. Jackson Hewitt and Liberty Tax quickly announced that the prohibition had no effect on their ability to offer RALs, and that they would continue to offer them.

On Friday, the FDIC moved another step closer to shutting down RALs completely, when they told Republic Bank – RAL provider to both Jackson Hewitt and Liberty Tax – that the loans were ‘unsafe and unsound’ without the IRS’ input. Republic was one of only three banks left who provided RALs, so taking it out of the mix will have a big impact on the RAL market. In issuing its cease and desist order, the FDIC gave Republic 120 days to fix unstated violations of consumer protections, but allowed it to continue to offer the product.

Chase Bank voluntarily left the RAL market last year, and with the latest move – the only other two banks offering RALs are also FDIC-regulated, and thus potential candidates for the same type of cease-and-desist order issued to Republic -coupled with the IRS’ push for electronic filing with direct deposit or debit card payments, it looks increasingly likely that RALs will soon go the way of the dodo bird. And, for consumer advocates, that will be one loss that won’t be mourned.


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