Used Car News

Tax season started officially this month, but the collapse of a California bank has thrown it into peril.

Santa Barbara Bank & Trust suspended funding for refund-anticipation loans (RALs) in December when its parent company was barred from backing these loans with its deposits. The parent company, Pacific Capital Bancorp, faces collapse due to bad real estate loans.
Santa Barbara was one of four banks in the country that funded RALs and it controlled 75 percent of the business, according to Bill Neylan, president of Tax Refund Services.
Neylan’s company receives funding from another source and suffered no interruption of service. But other providers, including tax preparer Jackson Hewitt Tax Service, scrambled to find new funding.
Jackson Hewitt secured another partner, but only for half its branches. Small, local firms have been less successful, Neylan said.
This creates an opportunity for dealers who can provide RALs. Neylan suggested offering this service to the general public, even if consumers don’t plan on buying a vehicle right away.
Neylan said Tax Refund Services benefited already from this shake-up. Business is 40 percent above last year.
“We were anticipating growth anyway, but not this strong,” Neylan said.
The first day money started flowing from the IRS was Jan. 18. Tax Refund Services cut more than 1,000 checks that day.