H&R Block takes HSBC to court to save RALs

H&R Block clients accustomed to receiving Refund Anticipation Loans (RALs) might be disappointed this tax season because the only bank that underwrites these loans for the company, HSBC Bank USA, might pull out of the program.

RALs are short-term loans secured by a taxpayer’s anticipated tax refund. Approximately 40 percent of H&R Block’s clients used RALs in 2010.
 
Last month, H&R Block sued HSBC in a federal court in St. Louis, alleging that HSBC has failed to honor its contract to back the loans. The contract does not expire until next year.
 
The two parties announced on November 11 that they are "engaged in discussions in an attempt to settle the litigation to confirm the availability of settlement products," according to a H&R Block company statement, but a court hearing has been scheduled for this week.
 
H&R Block claims that HSBC has not taken the necessary planning steps to ensure that the tax preparation firm will be able to offer RALs and refund anticipation checks (RACs) during the 2011 tax season.
 
The lawsuit also states that HSBC has refused to provide lending for the products because the Internal Revenue Service (IRS) announced in August that it will no longer issue a report called the debt indicator, which is used as an underwriting tool for RALs.
 
When the IRS acknowledged receipt of a tax return filed electronically by a tax preparer in the past, the agency would include a debt indicator in the acknowledgment file. The debt indicator showed whether some, or all, of a taxpayer’s refund would go to federal liens for back taxes, child support, or delinquent student loans.
 

Related items:

You may like these other stories...

Koskinen warns filing season could be most complicated yetImplementation of the Foreign Account Tax Compliance Act and the Affordable Care Act, combined with a tight budget and the possibility of Congress passing a late...
Accounting group pushes back against retirement age scrutinyMichael Rapoport of the Wall Street Journal reported that the American Institute of CPAs (AICPA) on Monday pushed back against federal regulators who are again...
There's still time to take advantage of last-minute, tax-saving moves for dependency exemptions. For 2014, there are bigger dependency exemptions, as well as rules that, in some cases, are dauntingly complex.The 2014...

Already a member? log in here.

Upcoming CPE Webinars

Oct 23Amber Setter will show the value of leadership assessments as tools for individual and organizational leadership development initiatives.
Oct 30Many Excel users have a love-hate relationship with workbook links.
Nov 5Join CPA thought leader and peer reviewer Rob Cameron and learn ways to improve the outcome of your peer reviews while maximizing the value of your engagement workflow.
Nov 12This webcast presents basic principles of revenue recognition, including new ASU 2014-09 for the contract method. Also, CPAs in industries who want a refresher on revenue accounting standards will benefit.