Mark Winston Griffith
H & R Block: More is Less
H&R Block's receiving a bank charter from the Office of Thrift Supervision on Wednesday is disturbingly connected to New York Attorney General Elliot Spitzer announcing, on the very same day, his office's law suit against H&R Block for allegedly ripping off low-income customers with third rate IRAs. It is tempting to view them as isolated incidents, but don't be fooled.
If you are in need of financial services, H&R Block, to borrow from popular vernacular, is all up in your stuff. Let's say you walk into the offices of the nation's largest tax preparation service with the intent of simply trying to improve conditions for you and your family. First, of course, Block will prepare your taxes, something you could get done free of charge from one of the free tax preparation sites spread across the city. Then Block might charge you an arm and a torso for a brand of short term loan that Block was once sued for because it was deceptively passing these loans off as "Rapid Refunds". Then Block offers to make you a high- cost mortgage from their mortgage department. And now Block is allowed to become a full service bank? You do the math.
H&R Block is the poster child for why advocates want fire walls between different kinds of financial service products, especially considering that many of these products are designed to exploit the cash flow and asset building desperation of working families.
The deregulation in the financial services industry that has occurred over the last ten years, allowing everyone and their grandmother to hawk financial services, helped set off a modern day gold rush, and the dollars swimming around low-income neighborhoods are bright and shiny nuggets. And of course now Wal-Mart, whose two previous attempts to score a bank charter were rejected, has applied once again for a bank charter in its quest to become the country's one-stop shopping destination for ALL the consumer and financial service needs of working families. To be fair, Wal-Mart's most recent bank charter application, if approved, would not make them a retail bank, but few doubt that this is Wal-Mart's way of sticking their toe in the water before the life guard gives them the okay to do a cannonball into the pool.
Unlike that ridiculously affordable $8.00 shirt you may have picked up at Wal-Mart (made possible of course, by Wal-Mart's low-wage earning staff), my guess is the financial services that may one day be available at H&R Block and Wal-Mart will have high transactional costs and be of inferior quality, just like those now offered by most financial service providers who target low-income neighborhoods.
New York Times columnist David Leonhardt recently argued that this kind of service, from America's largest retailer, will ultimately be good for low-income consumers because it will undercut even higher priced, fringe banking sharks. I say, talk to the people who went to the very mainstream H&R Block, sunk their savings in an "Express IRA" and ended up paying more in fees than they received in investment earnings. I wonder what they would say.