FOR IMMEDIATE RELEASE


H&R Block is Taxing to Low-Income Families – National Consumer Groups Ally to Protest Bank Charter

Contact:  Tom Feltner (312) 427-8070

(October 5, 2005, Chicago, IL)  National consumer rights groups today joined
in protest to halt H&R Block’s plans to become a federally chartered
savings and loan. The groups condemn the high cost products peddled by H&R
Block in low-income communities and communities of color. For example, a
consumer going into an H&R Block office for tax advice, who is entitled to
a $2,000 tax refund, could end up with a refund anticipation loan (RAL) with an
APR of more than 180 percent, costing $100 for a loan lasting less than two
weeks. H&R Block brokered more than four million RALs in 2004, earning more
than $174 million on them.

The protest comes as the Office of Thrift
Supervision (OTS), one of the federal bank regulators, holds a hearing on the
plan, which community groups believe would facilitate H&R Block’s gouging
of low-income communities.

“H&R Block is proposing a back door entry into
banking–continuing to offer a broad array of high cost products to low-income people,
while circumventing the requirement of most banks to reinvest in local
communities where they conduct business,” said Kevin Stein, associate director
of the California Reinvestment Coalition.

Protestors hope the third time
is not a charm for H&R Block, which has twice before submitted applications
for a bank charter only to withdraw them in light of the serious concerns
raised by consumer groups.

“If H&R Block wants to be a bank, it should get
out of the business of brokering predatory refund anticipation loans (RALs) to
working poor families. A bank should not be steering families into loans that
charge APRs of up to 700 percent. It should be providing low cost
savings accounts so these families can get their
refunds quickly and safely,” stated Chi Chi Wu, a staff attorney for the National Consumer Law Center.

"More than half of H&R Block’s mortgage
loans to African-Americans in 2004 were over the federally defined subprime
rate spread of three percent over Treasury securities on a first lien, five
percent on a subordinate lien. This rose to over 70 percent in Missouri, to which H&R Block is
trying to confine its CRA responsibilities. The OTS should deny Block’s
applications," said Matthew Lee, the executive director of Inner City
Press/Fair Finance Watch.

H&R Block’s practices are harmful to low-income
communities and communities of color. The groups believe that H&R Block
should not be granted charter approval unless certain conditions are satisfied
to ensure Block’s bank would serve the financial services needs of all its
communities:

  • Block must stop brokering triple digit APR Tax Refund Anticipation
    Loans.
    These predatory products strip wealth from consumers, especially those with the
    lowest-incomes who qualify for the federal Earned Income Tax Credit. To add
    insult to injury, Block not only collects fees for arranging these predatory
    loans for its clients, but also profits by buying up to a 49 percent stake in
    the loans. Block must commit to specific and substantial targets to get its
    “unbanked” customers into low cost savings products so that they can join the
    financial mainstream and start to build assets.

  • Block’s bank must not circumvent the Community Reinvestment Act. Block’s bank proposes to
    take deposits and offer bank products nationally through its tax preparation
    offices, yet reinvest only around its Kansas City home. Block must commit to
    reinvest in all markets where it engages in significant deposit and lending
    activity. Block’s plans fly in the face of the goals of the Community Reinvestment
    Act, which encourages banks to reinvest back into local communities where they
    are doing business.

  • Block must improve its lending practices. With a federal charter,
    H&R Block could one day seek to protect Option One Mortgage, its high cost
    home lender, from state and local consumer protection laws. More than half of H&R Block’s
    mortgage loans to African-Americans in 2004 were more than the new federally
    defined subprime rate spread. This rose to more than 70 percent in Missouri, to which H&R Block is
    trying to confine its CRA responsibilities. H&R Block also remains one of the only
    financial services companies that do not guarantee its customers the lowest
    cost home loan for which they may qualify. Block has indicated it might move in
    this direction, though the details are not clear.

  • Block should end all relationships with check cashers and commit in
    writing to not engage in payday lending. Block currently partners with ACE Check Cashing to
    place check-cashing machines in its tax prep offices, and has other
    partnerships with check cashing companies. Banks should not be engaged in such
    activities, which may open the door to abusive payday lending practices.

Marva Williams, senior vice president of Woodstock
Institute said, “Mainstream
financial institutions have no place in the financial fringe. H&R
Block must cease activities that contribute to the poverty surcharge, such as
high-priced check cashing and expensive short-term consumer and mortgage
loans. Instead, H&R Block must commit to providing affordable
financial services that allow consumers to build wealth and assets.”

This application poses one of the first tests for
new Office of
Thrift Supervision Director John Reich. It is also one of the first bank
applications after the release of new home mortgage data showing significant
disparities in the prices paid for home loans by different race and ethnicity
groups.

  • Woodstock Institute was established to
    research, develop, and promote ways to bring economic resources to lower-income
    and minority families and communities. Woodstock works locally, nationally,
    and internationally to further this goal. Woodstock’s partners include:
    community organizations, local and national economic justice coalitions,
    academics, policy makers, financial institutions, and foundations.

  • California Reinvestment Coalition’s mission is to revitalize California’s low-income and minority
    communities by increasing access to credit and deposit services. Our goals
    include leveraging the federal Community Reinvestment Act to increase the flow
    of credit and investments into California’s low-income communities
    and communities of color.

  • Community
    Reinvestment Association of North Carolina
    is a nonprofit,
    nonpartisan research and advocacy organization whose
    mission is to promote and protect community wealth. We advocate for change in
    the lending practices of financial institutions to promote wealth building for
    underserved communities and to end predatory lending practices that strip
    wealth.

  • Inner City Press/Fair Finance Watch was founded in the South Bronx in 1987. Its members work
    on issues including equal access to housing, telecommunications, and
    environmental justice. Through its Fair Finance Watch it advocates against
    predatory lending at home and even overseas.

  • National Consumer Law Center is a nonprofit organization
    specializing in consumer issues on behalf of low-income people. NCLC works with
    thousands of legal services, government, and private attorneys, as well as
    organizations who represent low-income and elderly individuals on consumer
    issues.

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