H&R Block Inc., best known for its tax preparation services, is expanding into banking.
The company, based in Kansas City, Mo., planned to announce at its annual meeting Thursday it will begin offering bank accounts to customers who need them so they can take advantage of direct deposit of their tax refunds.
The H&R Block Emerald Account will be linked to a prepaid bank card so that account holders can access their money easily via automated teller machines, or ATMs. The company also was announcing creation of high-yielding savings accounts and Individual Retirement Accounts; reduced fees in its refund-anticipation loan program; and improvements in its education and advice reports.
“We think the things we are doing will solve a whole host of the problems our clients face,” H&R Block chairman and chief executive, Mark A. Ernst, told The Associated Press in an interview.
H&R Block estimates some 3 million of its clients do not currently have bank accounts, forcing them to pay high fees for check-cashing services and to make do without formal savings accounts.
Ernst said the company hoped to open at least 1 million bank accounts for its clients in next year’s tax season.
He said many of the innovations are possible because H&R Block obtained its own thrift charter and opened a savings bank in May. That will make the new accounts eligible for coverage by the Federal Deposit Insurance Corp., which insures traditional checking and savings accounts for up to $100,000.
He said H&R Block also has a new agreement with the London-based HSBC banking group, which processes refund anticipation loans for the company.
Among the changes will be lower cost refund anticipation loans, Ernst said.
With refund anticipation loans, customers who have their taxes prepared by H&R Block are offered their refunds immediately in return for a fee.
A federal judge in Chicago recently approved a $39 million settlement in a long-running class-action lawsuit against H&R Block by consumers who claimed they paid too much for these loans — in some cases, more than 100 percent interest.
H&R Block’s new refund anticipation program “will significantly reduce the cost of refund lending for the upcoming tax season,” the company said.
It said the average refund loan of $2,800 will cost as little as $60, including a finance charge of less than 1.1 percent when the loan is combined with a bank account.
A government tax refund likely could be directly deposited to the bank account in as little as 11 days, H&R Block estimated. “As an 11-day loan, the finance charge translates to a 36 percent APR (annual percentage rate) and meets benchmarks suggested by consumer advocates,” the company said.
The high-yielding savings accounts and the IRAs will carry a 5.25 percent annual yield, the company said. That will make the accounts competitive with online and other high-yield savings accounts.
H&R Block said it expected some of these new accounts to be funded with consumers’ tax refunds. The Easy Savings Account is envisioned as a basic emergency fund for savers, while the IRA is aimed at growing retirement assets.
There are no minimum balance requirements or annual fees for H&R Block tax clients; the annual fee is waived for non-clients who maintain a $300 balance, the company said.