Block's bad fortune is nevertheless terrific news for Hewitt's Liberty Tax Service and his old company, which have made arrangements to offer RALs at most of their stores this season, although Hewitt told me in January that his lender, Republic Bank, intended to nearly double its rate, meaning his clients will pay more for fast refunds this year. Shares of Jackson Hewitt stock jumped 30 percent—and shares of H&R Block tanked—the day after the feds' HSBC decision was announced. The long-term outlook, however, depends on whom you ask. "If you tell me who's going to be elected president in two years, I'll tell you if we'll still have RALs," Hewitt says. Morningstar's Lekraj, for his part, is convinced RALs soon will be a thing of the past. "Block will no doubt be losing customers to these other two entities," he explains. "But that's over the next tax season or two. It's my belief that long-term, everyone will be in the same position."
Consumer advocates, however, warn that private-equity groups and hedge funds are eyeing the RAL business. Santa Barbara Bank & Trust, the bank that federal regulators banished at the end of 2009, is back this year as the Santa Barbara Tax Products Group—now owned by a private-equity firm.
In any case, the use of some kind of rapid-refund mechanism to fleece low-income taxpayers is practically a given. "My experience is that these companies can get really creative given the stakes," says David Rothstein of Policy Matters Ohio, a Cleveland-based advocacy group that's part of a coalition fighting the instant tax mills. For starters, there's the RAC, which brought in about $400 million for the industry last year, and is often nothing more than a pricey way of ensuring that the preparers get their money right away. And there are other potential growth areas, like debit cards. H&R Block, for one, will happily put your refund on its "Emerald Card" for a $45 fee. There's also the so-called preseason or "paystub" loan (PDF), a partial advance of maybe $1,000 against a person's refund granted in December or early January, before the taxpayer has even received a W-2. The charges on Instant Tax's preseason loans are low compared with a RAL, Ogbazion told me, and work out to an APR of around 25 percent. But then, no matter what the big chains dream up as a RAL replacement, nothing counts more than the steep fees they charge to do someone's taxes. "You do what you can to get people into your store," Ogbazion says. Bottom line: With all that cash sloshing around low-income neighborhoods each tax season, no one expects the ambitious preparer to give up without a fight.
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