H&R Block Inc.'s tax-loan business has a new $2.5 billion line of credit from its longtime banking partner, HSBC Holdings PLC.
The Kansas City, Mo., tax preparation company said in a regulatory filing Tuesday that its Block Financial subsidiary will buy participation interests in refund-anticipation loans this tax season with the new line of credit.
HSBC already funds the RALs that H&R Block offers as part of its tax-preparation services.
The controversial and lucrative loan products, which are typically geared toward lower-income and often underbanked consumers, are coming under increased scrutiny this year from both banking regulators and the Internal Revenue Service.
One of H&R Block's main competitors, Jackson Hewitt Tax Service Inc., said last week that it did not expect to have funding for more than half of its RALs this year, after regulators blocked its main banking partner, Pacific Capital Bancorp Inc., from funding the products.
H&R Block's new line of credit is a separate agreement from the company's existing contract with HSBC, which expires next year, according to the filing.
But HSBC's decision to lend additional funds to H&R Block's tax-loan operation is something of a reversal for the banking company, which has been trying to reduce its participation in the controversial RAL business in recent years.
A spokeswoman for HSBC said in an email Tuesday, "HSBC will honor its contractual obligations for the duration of our contract with H&R Block, which includes the provision of a RAL funding facility."