Chase outta RAL Biz

[anu31402]

Chase, is exiting the Refund Anticipation Loan Business. Whatz up?


April 28th, 2010



To: All Drake Business partners that use Chase Bank.

From: Phil Drake, Drake Software



We learned on the afternoon of April 27th that Chase is exiting the RAL/RAC business at the end of this e-filing season. We wanted to communicate that to you as quickly as possible.



I want to assure you of the following things:



1. We, at Drake Software, are working diligently to make sure that you have good choices for a bank relationship for the next tax season.



2. While this news is a bit surprising, and we are sorry to see Chase leave, there is no reason to panic. Multiple banks have entered and exited this business space over the years (and we have done business with nearly all of them).



3. We will keep you informed about the banking opportunities that we develop throughout the year, so that you can make an educated decision well before tax season starts.



4. Drake Software is not exiting this business, and we will be around to help you for many years to come. We currently work with four other banking partners and will be sending you more information about them soon.



I appreciate your business and your trust --- we will work hard to continue to earn both of those in the future.



God Bless,



Phil

[thomtax]

Unfortunately, this is the first that I have heard of it and I use both Drake and Chase.

LT

[taxmandan]

Just got the message too. I wonder if any banks will stay in the RAL biz? I've been w/ Chase for 11 years with no problems. Probably means the 10-12 RALs I do each year will end. The RAC process was my reason for offering bank products so not a big deal for me.

[Snaggletoof]

Maybe Pending Legislation?

I wonder if this has anything to do with pending legislation?

Why would a bank walk away from interest rates in the 200% range, when virtually all the administrative work is being done by the tax preparer, and the govt acknowledging that the refund will be there in 10-13 days?

The headliner (if you can believe it) for the Obama administration on this legislation is to stop banks from ripping off consumers with ridiculous fees and rates. The RALs fall into that category, no doubt.

If indeed pending legislation is the culprit, a more serious question might be: what if ALL financial institutions stopped their RAL arrangements?

[Peachie]

If all RAL arrangements were stopped

[QUOTE=Snaggletoof;102637If indeed pending legislation is the culprit, a more serious question might be: what if ALL financial institutions stopped their RAL arrangements?[/QUOTE]

we could compete with HRB, JH, etc. on a more even level. None of my clients use Rals, as I have shown them the wisdom over the years of all that unneccessary interest. Though Chase is the bank I can use, I haven't had to. In addition, taxpayers could learn patience all over again as it was before RALs took over taxes.

Peachie

[taxea]

Good for them! This is such a ripoff. I have been doing taxes since 1994 and am proud to say I have never done a RAL. Even when I worked for a big box, my manager and I had a secret competition on who would do the fewest. She did one, I did none.
And, no, I didn't give the client to another preparer. I explained what it would cost them.

[WhiteOleander]

Good for them! This is such a ripoff. I have been doing taxes since 1994 and am proud to say I have never done a RAL. Even when I worked for a big box, my manager and I had a secret competition on who would do the fewest. She did one, I did none.
And, no, I didn't give the client to another preparer. I explained what it would cost them.

I explain to the penny exactly what fees and interest they will pay if they choose the RAL option. The client chooses to do it anyway. I dislike RALs. I would like Congress to outlaw them. But, the banking lobby is powerful.

So, stating that the explanation will keep the client from choosing a RAL is incorrect. The client wants the product. Preparers do explain everything.

[DonPriebe]

...
So, stating that the explanation will keep the client from choosing a RAL is incorrect. The client wants the product. Preparers do explain everything. ...

RAL clients are generally not known for the financial analysis ability.

I used to work in a downtown storefront (not HRB) that was across the street from a large hotel and about two blocks from an IRS walk-in office. I would get hotel worker clients who had minimal refunds ($200 from the no child EIC). Most were not able to pay our fee up front. So I explained their options - have us do the return and have $125 taken out of their refund, or walk down to the IRS and have the return done for free. Most had us do the return ... "The IRS makes you wait in line for almost a half hour".

[thomtax]

Good for them! This is such a ripoff. I have been doing taxes since 1994 and am proud to say I have never done a RAL. Even when I worked for a big box, my manager and I had a secret competition on who would do the fewest. She did one, I did none.
And, no, I didn't give the client to another preparer. I explained what it would cost them.

A different viewpoint. I do very few RALs and hate to see the people that can afford them the least, pay these fees. Having said this, there are three points that conveniently get overlooked.

1 - It is not your (tax preparer) money. I point out the costs of doing this, but if they still want to get a RAL, it is their decision, not mine. Heck, if they want to take a $5,000 refund and stand on the street corner and give $50 to the first 100 people that come along, while I may think it is stupid, it is their choice to make.

2 - Sure the percentages are high when multiplied out to a year's figures. But this is a statistic and like so many can be very misleading. Since it is for such a short period of time, the actual dollars is very restricted and is known "up front". I will always remember the point made on statistics: During the height of the cold war, there was a two team track meet between the USSR and USA, where the US won. The Soviet headline "Glorious Soviet team finishes second in track meet while the USA team finished next to last."

3 - I once had a client who had lost a lot of time working due to weather conditions. She wanted to get a RAL. I told her "You do understand that this will cost you an extra $100."
Her reply was, "Yes, but the penalties on my late payments will exceed $100 and my credit rating will be messed up." This was a case where the RAL was a good and wise decision. So you cannot lump everything into a good or bad decision.

While you may be proud of never letting the client, who is responsible for his return, make a decision, it is just possible that you could be doing them an injustice.

LT

[Black Bart]

RALs in a downward spiral.

Republic Bank has dropped their 2010 finance charge 70%. From their newsletter: "...the bank fee on an average RAL of $3,500 will cost $57.26 compared to $123.70...last season...Due to the increasing speed of IRS acknowledgments...we have discontinued the NowRAL (instant loan) product..."

Competition and increased federal pressure are draining away the big money and that's usually the end of things (for a related article, Google "RALs, the Beginning of the End").

Why do people want RALS? Have you ever bought something cheaper by waving a wad of $100 bills under someone's nose? Many middle-class RAL customers simply like the convenience of getting their money the next day instead of waiting 10 days and they're perfectly willing to pay $200 to do so. These folks are not in dire straits and actually price shop between HRB, JH, and us.

As to the desperate cases, preparers without RAL experience are always saying "These poor victims don't realize how much they're paying, they must be made aware of the costs, etc." Truth is, the majority of these simply don't care what the price is (I've told many -- they aren't interested). Most of that $5K-$8K refund is from EIC/CTC (up sharply from last season -- EIC now pays on three kids instead of two). The way they see it is, it wasn't their money in the first place and if IRS wants to send them several thousand dollars for nothing, then they don't mind paying a paltry $200 (or whatever) to get it today instead of next week.

As for the moral questions about RALs, I've never regarded them as the bogeyman they're made out to be. If you put an APR rate on bank OD charges, credit card overlimit and late filing fees and so forth, I'll bet they would double RAL % rates. Ordinary, fiscally-prudent people are being gouged daily for these things and nobody seems to think it's a crime. RAL clients want quick service and they're paying for it. If I want overnight mail, it costs me extra. If I fly instead of driving, it costs me extra. If I want stadium seats that aren't up in the nosebleed section, it costs me extra. What's the difference?
.

[JohnH]

I agree completely with the last few posts. I don't do RAL's (heck I don't even efile) and up until the beginning of this tax season I always railed against RAL's because of the extremely high effective APR they incur. I'd say I had a high-minded & somewhat snooty attitude about RAL's. However, after getting a good overview on the Unofficial ATX forum based on a set of imaginary refund amounts, I realized the fees really aren't that bad in real dollars for someone who needs the money right away and doesn't mind payning extra for the convenience.

This evening I stopped at Baskin Robbins on my way home and paid $4 for two scoops of ice cream when I could have spent an extra 30 minutes going to the supermarket to get a quart for about the same amount of money. Ignoring the quantity difference, that's probably a 50,000% APR I paid for the convenience of having the ice cream RIGHT NOW. Call me a financial fool, chastize the Baskin Robbins franchisee for his immoral practice of ripping off ignorant people like me, and criticize the government for enabling this sort of waste via the free market system, but in the end we both got what we wanted out of the transaction.

[origun]

RALs at Block

As I work at HRB, I have to offer RALs but I certainly don't push them. In fact, I always discourage them. However, some people need the money ASAP to pay the rent or keep the car from being repossessed. The APR, if they have the money put on a debit card, is 36%--which certainly is high but could be worse...and has been worse in the past.

One of the things I often hear people say when criticizing RALs is that they could have refunds direct deposited and receive it in less than 2 weeks. However, in my experience, most of the people who get RALs do not have checking accounts. The Block debit cards work well for them as they don't have to pay check cashing fees.