Tag Archives: hsbc

H&R Block, HSBC, & the end of RALs

57334671TB002_Last_Minute_TNew Orleans Refund Anticipation Loans or RALs are a product that have preyed on lower income worker families since their inception and promotion by the big tax preparers, H&R Block, Jackson-Hewitt, and Liberty, as well as smaller fry who could get access to credit.  Negotiating with these companies could get depressing when I worked with the teams of ACORN members who the ACORN Financial Justice Center when better disclosure meant looking at a rate package that would be between 220 and 250% annualized.  There was never anything good about the products no matter what they were called, but their heartbeat was the desperate need of many families to have the money the few days quicker than it could be obtained from the IRS on an electronic or mail filing.

In a significant concession HSBC, the main lender to the large preparers, announced that it was departing the business in what they described to me, and I reported in Citizen Wealth, as “reputational” concerns.  Despite the fact that they were making almost $200M per year from this business, there was no way to disguise its predatory nature.  JP Morgan-Chase was another big player in a session where they were conceding that they would lower rates, asked me sarcastically if we thought it would be “better if they got out of the business,” to which we answered “yes!”  Santa Barbara Trust was the last major lender still hanging in the business.  HSBC has assured us that they were on a step down, transitional contract, which would pull them completely out of the business with H&R Block by the end of 2009 while they dropped other companies immediately.

Given that background, I was both disappointed and delighted to read the news from H&R Block that they were scrambling to replace HSBC as their lender and credit source for RALs for the 2011 tax season.  This should not have been a surprise to them, but it was a surprise to me to see that HSBC had continued to stand behind the RALs in 2011, long after they had assured me that they would be out of the business completely.  Clearly in the last 2 ½ years since I left ACORN the organization had taken its eye off of the target and the consequences had not been good for lower income working families who are dependent on professional preparers.  That is disappointing.

Delightful was seeing that the IRS finally did the right thing after having been an enabler to this thievery for so many years and eliminated a code this last summer that allowed tax preparers to know whether or not the likelihood was good that the filer would receive their entire refund sufficiently to cover the charges and fees being larded on by the preparers.  The IRS was effectively doing a low grade “credit check” for the preparers.  Disgusting!  Once they did that the Office of the Controller of the Currency (OCC), one of the many federal bank regulators, issued a determination barring HSBC and the like from such lending by classifying it now as too risky, despite a last minute contract extension that Block (after filing suit against HSBC for reneging on the contract) had negotiated with HSBC for the 2011 season where Block would cover all HSBC losses.  Finally the federales did the right thing!

Though this may be the death knell for RALs, which are a loan with interest, against the sums, some of the other predatory schemes will still survive.  Block announced that it would continue to fund refund anticipation checks, which are more like advances, through its own bank, the H&R Block Bank.

These predatory operations have been crack cocaine for the big-time preparers for years, so it will take some time and effort to cut the heads off of theses snakes, but at least more of the tails are now going.

Thanks to Eileen A.J. Connelly and David Pitt, AP personal finance writers for a great story on these developments!


ACORN International Launches Remittance Justice Campaign

Money_Orders_25Phoenix In Vancouver, Toronto, Ottawa, and Hamilton ACORN International and ACORN Canada joined today to dramatically step up the international campaign to achieve improved access and fair pricing for remittances from immigrant families and their relatives in their home countries.

Today in Toronto Kay Bisnah, President of ACORN International, also unveiled an extensive report underpinning the campaign called Past Time for Remittance Justice (a copy is available at www.remittancejustice.org or www.acorninternational.org). The report is the result of  months of work and research by a multi-national research team including a battery of student interns with ACORN International at George Brown College in Toronto as well other researchers in Baltimore, Little Rock, and New Orleans joined with ACORN International and its federated organizations and staff in Latin America, Africa, and Asia.  In a survey of costs focusing on major global banking institutions as well as Western Union and MoneyGram, ACORN International found that the costs are exorbitant and predatory and averaged more than double what the World Bank estimates current pricing.

President Bisnah is expected to ask Toronto Dominion at the release today in Toronto to set an early meeting with representatives of the organization in order to begin discussions on how remittance justice can be achieved as quickly as possible.  Members of ACORN Canada will be demanding similar meetings with HSBC at the Canadian headquarters of the bank in Vancouver, while members in Ottawa will be pressing the Bank of Montreal for a meeting as soon as one can be scheduled.   In Ottawa demands are also going to be made for Canadian regulators to take up the issue of remittances and begin creating a mandatory and effective system.

The grid in the report shows costs can in some cases suck out almost half of the money being sent to families in home countries by as much as one dollar for every dollar being transmitted.  In few cases were charges, commissions, and exchange rates taking less than twenty-five cents on the dollar.  The report calls into question World Bank estimates of an average 10% cost factor and while adopting the World Bank goal of no more than 5% costs, ACORN International calls for the changes to be immediate and comprehensive, including both sending and receiving fees.

Remittances are huge and involve an estimate of over $430 billion with 75% going from developed countries like Canada and the United States to developing countries.  Remittances are a substantial part of the gross national product (GNP) for many of the poorer countries and populations in the world.

ACORN International indicated that in coming weeks more banks will be targeted.  Beginning next week the demands will spread first to Lima, Mexico City, Buenos Aires, San Pedro Sula, Tegucigalpa, and Santiago (Dominican Republic) as well as Nairboi, Kenya and Mumbai, Delhi, and Bangalore in India.  ACORN International also intends to release the report and press demands with major banks headquartered in the United States, United Kingdom and elsewhere, as well as demand government accountability in the same locations.

The sum of remittances dwarfs all other forms of foreign aid and foreign direct investment in developing countries.  A reduction from a 10% average transaction cost to a 5% average would move more than $20 billion in remittances to aid families.  ACORN International believes there is nothing to justify existing charges, and seeks in the Remittance Justice Campaign to push charges to real and reasonable costs rather than the current global “highway” robbery of banks and transfer companies.

No doubt there will be a lot more to come, since these are big targets and this is a lot of money, but there is no question that justice must be come.