American Banker

To the

It was with disappointment that we read your recent articles noting that H&R Block
expects to get a charter soon.

federal regulators have given a green light to Block is news to the community
groups that have opposed Block’s plans to establish a federally chartered
savings and loan. In fact, Block is still in the middle of the approval

organizations listed below collectively have objected formally to approval of
the pending application. It is our understanding that the Office of Thrift
Supervision believes that sufficient issues have been raised to warrant a formal
meeting to determine whether Block should get a bank charter at all.

application for a thrift charter should not be viewed as a done deal. Block has
twice submitted applications for a bank charter, only to withdraw them in light
of the serious concerns consumer groups have raised. This time is no

We hope the
third time is not a charm for Block. That may depend on new OTS Director John

practices are harmful to low-income communities and communities of color. We
believe that the OTS and the FDIC should not grant approval to Block’s
applications unless Block ceases its harmful

Block must
cease arranging, marketing, and investing in refund anticipation loans. These
predatory products carry equivalent annual percentage rates of up to 700% and
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% stake in the loans.

Block must
commit to specific targets to get its unbanked customers into the account and
savings products that CEO Ernst only hints may be offered by the bank. [“Block
Quits Subprime Price Fight,” Sept. 6, page 1]

Block Bank
must not circumvent the Community Reinvestment Act. Block proposes to take
deposits and offer bank products nationally through its tax-preparation offices
yet reinvest only around its Kansas
City home. This growing trend of evading the CRA through
regulatory smokescreens seriously undermines the goals of community

Block must
commit to reinvest in all markets where it engages in significant deposit and
lending activity. Further, Block must commit to be evaluated under the lending,
investment, and services tests of the CRA, not the choose-your-own CRA exam that
the OTS has created for large banks.

Block must
engage in responsible lending practices. We believe Block initially sought a
thrift charter to secure OTS preemption protection from state and local
anti-predatory-lending laws for its subprime subsidiary, Option One. Block
should not be allowed to evade state and local laws, especially given its
disparate lending.

More than
half of Block’s mortgage loans to African-Americans in 2004 were over the
federally defined subprime rate spread of 3% over Treasury securities on a first
lien, 5% on a subordinate lien. This rose to over 70% in Missouri, to which Block
is trying to confine its CRA responsibilities.

Block also
remains one of the only financial services companies that does not guarantee a
prime product to prime customers. Block has indicated it might move in this
direction, though the details are not clear.

should end all relationships with check cashers and commit in writing to not
engage in payday lending. Block currently partners with Ace Cash Express to
place check-cashing machines in its tax-prep offices. Banks should not be
engaged in such activities, which also may open the door to abusive
payday-lending practices.

The federal
banking regulators have made this a bad year for communities nationwide,
choosing to water down CRA reinvestment obligations and protect abusive lenders
from state and local legislators and enforcement agents. We hope this
application does not suggest that the regulatory process itself has become a
formality, where regulators go through the motions and make a pretense of
concern for community group input while assuring bank applicants that they will
get approval just in time for tax season.


Kevin Stein, associate
Rhea Serna, policy advocate,California Reinvestment Coalition, San Francisco
Jean Ann
Fox, director of consumer protection
Allen Fishbein, director of housing and
credit policy, Consumer Federation of America, Washington
Chi Chi Wu, staff attorney,
National Consumer Law
Center, Boston
Matthew Lee, executive director,
Inner City Press/Fair Finance Watch, Bronx, N.Y.
Marva Williams, senior vice
Tom Feltner, communications and development associate, Woodstock
Institute, Chicago
Peter Skillern, executive director,
Community Reinvestment Association of North Carolina, Durham


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