Jackson Hewitt Loses Bank Funding for RAL’s
Jackson Hewitt’s key bank has reportedly cut off most of the money it used for tax refund loans.
Regulators ordered Santa Barbara Bank & Trust to stop providing the loan money, which covered about 75 percent of Jackson Hewitt’s financial products program, according to a regulatory filing by Jackson Hewitt reported by Bloomberg. Shares of the company, the No. 2 tax preparer behind H&R Block, dropped $1.34 to $4.50 on Thursday.
The Office of the Comptroller of the Currency told Santa Barbara Bank & Trust on Dec. 18 that the lender would not receive regulatory approval to originate the refund anticipation loans in 2010, according to a statement from the bank’s parent, the Pacific Capital Bancorp. A bank spokesman, Tony Rossi, said that “the tax refund loan business is a sort of niche business that falls outside of what would be considered core banking operations.” The bank signed a nonbinding letter of intent with a private equity firm to sell the tax business, the statement said.
Tax preparers are locked in a battle for customers, with Jackson Hewitt vowing this month to regain market share from H&R Block. Firms can attract clients with refund anticipation loans, in which customers who need cash immediately can get a short-term loan, typically lasting a few weeks, that is based on the expected amount of their tax refund. Jackson Hewitt, with 6,600 outlets and almost 3 million clients, has been losing customers to H&R Block and Intuit, which makes TurboTax software. It suspended its dividend in March and has hired Goldman Sachs to explore “strategic alternatives,” language that typically means a company may be sold.
