Most people are familiar with payday loan stores, the much-reviled practice in which cash-strapped consumers can get an advance on their next paycheck. Financial professionals hate these stores, as they claim they trap low-income individuals in a never-ending spiral of debt, often at ridiculously high interest rates (when calculated on an annual basis).

Tax professionals have had their version of the payday loan since long before Check Into Cash and its brethren became players on the national (or regional) stage. Known formally as ‘Refund Anticipation Loans,’ or RALs, they got the catchy nickname of ‘Rapid Refund’ from their biggest purveyor, H&R Block. For years tax professionals have faced the decision of whether or not to offer RALs, and for a time, a number of non-H&R preparers who did offer the product often did so (quietly) through H&R itself. Those preparers who did offer RALs soon came to find that it appealed to a certain demographic, which was ill-suited for the other services a preparer might offer, such as tax planning. Several of my colleagues offered RALs for only a year or two before abandoning the concept, while others, seeing where the trend was leading, never offered them at all.

Then came semi-mandatory e-filing, and the IRS’ own ability to turn around a refund on an e-filed return in weeks instead of months. As e-filing increased, the need for a third party to provide a loan against a refund seemed less and less necessary.

Here’s how the whole RAL system worked:

1. Taxpayer goes to tax preparer to have return prepared.
2. Tax preparer prepares return, tells taxpayer he/she is entitled to refund, offers RAL.
3. Taxpayer accepts RAL, completes bank paperwork.
4. Tax preparer submits RAL paperwork to bank.
5. In more recent years, bank would verify with IRS that taxpayer had no liens, orders, etc. against refund and was entitled to receive full refund.
6. IRS would confirm ‘clean’ status.
7. Bank would approve loan, deduct all fees (including prep fee) and remit balance to taxpayer via check or deposit.

Tax preparers did love one aspect of the RAL – they could get their fee out of the RAL, meaning that they were less likely to deal with a bounced check. Of course, they had to take a haircut on the fee (in the form of fees from the bank), but hey, they got paid.

Now, however, that’s all by the wayside. A few months ago, the IRS announced they would no longer provide verification for RALs to banks, and today HSBC, H&R Block’s bank, announced that it has been prohibited by the Comptroller of the Currency from funding RALs, meaning that the nation’s largest tax service won’t be offering the product this year. Jackson Hewitt and Liberty Tax, apparently, are not impacted by today’s announcement, though it’s hard to see them offering the product as broadly as in years past without IRS participation, unless they jack up the rates. According to Block, nearly 45 percent of H&R’s clients apparently take advantage of the program, though if you look at the rates & fees and what’s left for the taxpayer, one wonders who’s getting taken advantage of here, particularly when it is entirely possible for a taxpayer entitled to a $400 refund to walk out with just $150 or less.