JPMorgan Chase & Co. is quitting the refund-anticipation loan business as the controversial loan product faces increased regulatory scrutiny.
The New York banking company began notifying the roughly 13,000 independent tax preparers it works with of its decision this week, a spokesman said Wednesday.
"We are discontinuing the refund-anticipation loan business because it's not a strategic fit for us," the spokesman said. "And we are reaching out to tax preparers so they have plenty of time to find a new bank for the next tax season."
Many tax-preparation companies partner with financial institutions to offer customers refund-anticipation loans, or RALs. Consumers can apply for these short-term credits ahead of their expected tax refunds.
JPMorgan Chase works mostly with smaller tax firms and not national chains like H&R Block Inc. or Jackson Hewitt Inc.
The decision to leave the business affects about 65 employees in the bank's Columbus, Ohio, office, the spokesman said. JPMorgan Chase is working to place those employees in other positions in that location.
Regulators have been tightening supervision of tax preparers and the RAL business. Starting next year, the Internal Revenue Service will require that all tax preparers register with the agency.
In February, the Federal Deposit Insurance Corp. slapped Republic Bancorp Inc. in Louisville with a cease and desist order that requires the company to, other things, increase its compliance oversight of the program.
Pacific Capital Bancorp Inc. in Santa Barbara, Calif., sold its RAL business in January after the Office of the Comptroller of the Currency blocked it from making the loans.
The OCC has previously warned of safety risks inherent in RALs and has advised consumers that RALs can wind up costing more than other loan products.