Tax preparation is one business where you have to be flexible. Congress is always changing the laws, the IRS changes rules and the RAL banks keep adding programs to make more money. Until this year. Oh, Congress and the IRS have made changes as usual but this year the RAL banks haven't added programs they ended them.
With the extension season over, my next order of business was to register for end of year workshops and figure out which RAL bank I will use in 2008. The decision can't be made until the fall since the banks don't set their prices and programs until then. This year it was especially important to wait because of all the "no more pre-season loans" talk last spring. My question was will someone play chicken and offer them after all? Then Congress banned RALs over 36%APR to active military personnel. The final issue was actually rumors. Lots of rumors that wouldn't be cleared up until the banks posted their programs and pricing.
Last year, I used Santa Barbara Bank and Trust (SBBT) and was happy with the program. But some of the rumors were that they would not allow a paperwork fee and were cutting incentive payments completely. They finally posted their 2008 program info and while they did reduce the RAL incentive there is no mention of disallowing a paperwork fee. Their big change is the pricing has shifted from set fees for RALs under $3800 to percentages on top of a set up charge. This makes more sense for the client but also makes it harder to explain to them. And the basic charge stayed the same. So, I signed up with them again.
Right now there is not a big choice for RAL banks. HSBC, the long time leader, is phasing out of the business as their contracts with software providers expires. Chase lost my business several years ago to splitting refund checks and bad customer service so that left just SBBT and Republic Bank as options. But who knows about future years.
There is a strong feeling that in a few years the RAL business will be very small. Besides the military ineligibility, there has been discussion of removing the debt indicator and legislating caps on the APR charged. There is also the conversion of e-filing format to XML. XML is currently used for the business returns and the IRS has been phasing it in to the 1040 series. Once the conversion is done, the idea is that refunds could be directly deposited within a few days of the return being filed and accepted. While there may always be a demand for instant money, I expect that RALs will take a back seat to direct deposit programs. Which is fine with me.