H&R Block Not Offering Tax Refund Loans

The tax refund loan industry has been a controversial one. A new order is barring H&R Block from offering tax refund loans in 2011 for the 2010 tax year. 

The tax refund loan is something that would bring a tear to any banker’s eye. It is a short term loan that produces big fees and interest payments. It has been offered to millions of taxpayers as a way of speeding up the process of getting their refunds in their hot little hands. 

The program has been considered controversial for a number of reasons. Primary among them is the simple fact that these loans really don’t provide any huge benefit. A taxpayer who files electronically can expect to get their refund back in as little as 10 days. Why then would you take a loan that costs you part of that refund in interest and fees? It makes no sense and is, frankly, a bit of a rip-off. 

The IRS has long disliked these loans. The last few years has finally seen it start taking action against them. In 2010, it announced it would no longer work with the banks backing the arrangement, particularly HSBC who works with H&R Block. Given this, HSBC refused to honor its contract with the tax preparer, which resulted in litigation. This became moot when the Office of Comptroller issued an order telling HSBC not to issue refund loans.

So, what does this mean for taxpayers? Well, H&R Block is the biggest tax preparer in the country. Ostensibly, this means individuals using the company will not have access to the loan program. In truth, there will be plenty of others offering similar programs. 

The real truth is this. Don’t borrow this money. It provides you with nothing and costs you everything. Surely you can wait 10 days for a refund. Also, a refund is a sign you should be withholding less from your paychecks.