Elaborating on his company's plans to enter the banking business, H&R Block chief executive Mark Ernst said that both the rates and fees the company charges customers for its refund-anticipations loans will be dramatically reduced by the time the 2007 tax season arrives.
Speaking at the company's annual meeting, Ernst said that the reduction means the typical RAL rate will be cut by more than 60 percent. The loans are the short-term cash advances made to customers who expect refunds after Block prepares their tax return. The practice has been the target of a number of lawsuits this year -- including suits filed by California Attorney General Bill Lockyer and New York Attorney General Eliot Spitzer -- that accused Block of charging excessive fees to a financially-unsavvy customer base.
Under the new fee schedule, a typical $2,800 refund loan might cost as little as $60, so long as customers open H&R Block bank accounts and arrange for refunds to be deposited directly into them. H&R Block said this equates to a 36 percent annual interest rate, in line with what consumer advocates suggest. It said this is below the 93 percent effective rate it might have charged before, and the 103 percent that its rivals might charge.
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