Monday, December 27, 2010

Government whack a mole

I remember years ago, my ex-wife making the proclamation that the more laws government makes, the more advantageous it becomes for the law breakers to the point that it drives out law abiding businesses.

At the time, I thought that was a stupid statement. But I'm willing to own up to being wrong (according to her that was all the time).

Let's take credit availability to low income households. See, do gooder types thought it would be a great idea to change credit card laws so poor people wouldn't get locked into a mess of credit card debt.

What happened?

Banks quit issuing credit cards to low income people. So if you need a quick $200.00 to cover your car payment, what do you do? Of course, you roll into your neighborhood paycheck lender and pay an even higher rate of interest than a credit card.

Of course, the do gooders, not done doing good for the poor, are attacking HR Block for Refund Anticipation Loans (RAL's). Now, for the record, these loans are a total rip off. But I've told the stories before of people who have contacted this office and asked for one of these because they couldn't wait the 7 - 10 days a normal efile refund would take to get to them.

Frankly, I don't need this kind of client. They're idiots. But even idiots need service too.

So HR Block was more then willing to take $400 to do a tax return with one of these RAL's attached to it.

But Nanny Dogooder apparently doesn't want HR Block to service your neighborhood idiot, so this is how they took care of that.........

Tax prep company H&R Block announced on Friday that it had lost a contract with HSBC after a federal regulator told HSBC to stop offering refund anticipation loans. The Office of the Comptroller of the Currency prohibited HSBC (HBC) from offering the loans, which forced the bank to end its long-term contract providing loans to H&R Block (HRB) customers, H&R Block said in its release.

H&R Block shares fell 8% in pore-market trading.

“As a result of the OCC’s decision, millions of taxpayers will be deprived of credit, or they will be forced to use higher-priced alternatives, without the slightest benefit to the solvency of HSBC or the banking system in general,” said Alan Bennett, H&R Block’s president and CEO.

H&R Block says refund anticipation loans (RALs) are much cheaper than other credit options — just $46 on a $1,500 loan. But the OCC has said that RALs are often unnecessary and costly.

“Although a refund anticipation loan may offer easy access to funds on a short-term basis, a RAL can be costly, and paying for a loan may not be necessary given how quickly you can get Office of the Comptroller of the Currency your refund from the IRS,” the agency said in a recent consumer advisory. ”These loans also may cost substantially more than other sources of credit that may be just as appropriate to your needs.”

So what's going to be the end result of Nanny Dogooder and her minions who want to protect the poor?

They're going to push these people towards Carmine, the neighborhood loan shark, who's not all that interested in trivialities like usury laws, collection laws, and the like.

All the while, legitimate companies will shrivel up in the process.

I guess I owe my ex-wife yet another apology.

Article here.......


Anonymous said...

Payday lenders charge 350% APR. It's written right on the loan dislosure. So a couple years ago when the proposition was up to cap payday rates at 36% APR there were many payday customers that thought loan prices would cut by 90%. But instead the lenders disappeared. Now the only place for some people to get loans is the kneecap crackers. Another case of the ivy league poli-sci 101 textbook fairy tale gets smacked down by the law of supply and demand.

Conservatives address the problem of exploitation by teaching people not to be a victim. This is far more effective than making laws banning exploitation. Exploiters will always find away around the law.

becbeq said...

Oh what a bunch of hooey. HRB was the company I worked for for 10 years. I HATED RALs. But, just try to talk a customer out of one. HRB changed the paperwork a few years back to ensure that customers understood just how much RALs cost. Here's the big secret: for most of these folks, it's *not their money*! They are getting a tax handout (I refuse to call it a refund) due to Earned Income Tax Credit and Addtl Child Tax Credit. Heck, the $4-$5k is someone else's money, what does the person receiving it care if it costs $125 to get the money today?

I would tell a person FOUR times how much a RAL cost. I would suggest that direct deposit was FREE and only took 7-10 days. I would suggest a Refund Anticipation Check, which only cost $24 and took 7-10 days. But, noooooooo, moochers had to have the money NOW. But, none of nanny states business if these folks want to do this. Aaarrrgh....

Just love it when gov't assumes an adult can't make their own choices.

gordon gekko said...

Becky, You make a good point. SO what if someone gets $400 in a transaction where you get $5000 you never earned in the first place.