Mellon Bank Corp. Wednesday began syndicating a $1.25 billion credit for H&R Block, which is once again gearing up to offer tax-refund loans.

The Mellon loan, which is structured as a one-year revolving credit, will provide liquidity to the Kansas City, Mo.-based tax preparer for its so-called "Rapid Refund" program. By offering refund anticipation loans, H&R Block lets taxpayers collect their refunds within days of filing.

Beneficial Corp. has an exclusive arrangement with H&R Block to underwrite the refund loans. The Internal Revenue Service sends the refunds of participating taxpayers directly to Beneficial.

Previously, banking companies, including Mellon and Banc One Corp., had reaped fee income by teaming with H&R Block to offer the refund anticipation loans. But they became less interested in underwriting these loans after the IRS stopped giving "direct deposit indicators," which are essentially credit checks on individual taxpayers.

"Most of the banks are scared to death of participating in these loans without the direct deposit indicator," said Paul Mackey, an analyst at Dean Witter Discover. "Beneficial is an experienced finance company and has developed scoring models over decades."

Analysts said this is the first year since 1994 that the tax preparer and the finance company are getting ready to offer refund acceleration loans.

"There is more risk now, which is the reason it's taken them two years to get back into it," said Alexander Paris Jr., an analyst at Barrington Research Assoc. Inc. in Chicago. "Beneficial and H&R Block are great partners and have a good data base of information."

Beneficial is expected to earn $75 million from the refund anticipation loans in 1997, which includes gains from collections on about $180 million of delinquent receivables.

H&R Block is anticipating about 3 million such loans, said analysts, and the average refund is about $1,400.

Some consumer groups have protested the loans because of their high annualized fees. But they remain popular with taxpayers.

"People roll credit card purchases at 20%, and that doesn't make economic sense," said Mr. Mackey. "People want that check, and they want it now."

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