Commonsense70: I am on the sidelines on RBCAA. I would pay a payday lender type multiple for their tax earnings -- which would imply downside from here. Their core bank and mortgage bank operations are positioned pretty well (good capital ratios at core bank, solid relative credit). I do not think they grow their tax business significantly given the high capital commitment. I also believe they do not want to rely on the tax business for a majority of their earnings.
Sharpshooter9443, according to HRB's 3Q09 10-q, page 9: "Our contract with HSBC provides for them to fund RALs through 2011, with an option to renew, at our discretion, through 2013."
KSTHANE, I am no legal expert but from my understanding, application fees are typically included in the APR. Some fees can be excluded. There are two other banks that JTX can turn to but: a) I believe it is too late for this tax season and b) both of those banks are shrinking their exposure to RALs. HSBC use to have a large relationship with JTX but got rid of them after their contract expired in 2007. As I stated above, I do not believe there is a bank to fill the void.
KSTHANE, thanks for your comment. As I mention in the write-up, it is my understanding that an application fee would be included in the APR calculation and therefore the total APR under the RBCAA pricing model could violate Kentucky usury laws. In addition, an application fee would be very difficult to administer. At a much lower APR, the underwriting guidelines will have to increase, along with denials. I am not sure how JTX can justify charging an ap fee to a customer who has been denied access to a RAL. They would also have to charge an additional fee for a RAC (which has no application). Further, it is my understanding that JTX relies much more heavily on SBB&T than RBCAA. The SBB&T issue is just as critical for JTX and the rest of the industry.
H&R Block: Stars Are Aligning [View article]
H&R Block: Stars Are Aligning [View article]
H&R Block: Stars Are Aligning [View article]
There are two other banks that JTX can turn to but: a) I believe it is too late for this tax season and b) both of those banks are shrinking their exposure to RALs. HSBC use to have a large relationship with JTX but got rid of them after their contract expired in 2007. As I stated above, I do not believe there is a bank to fill the void.
H&R Block: Stars Are Aligning [View article]