Tax Refund-Related Goods: Risk Management Gu

Tax Refund-Related Goods: Risk Management Gu

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Ceos of all of the National Banks and Federal Savings Associations, Department and Division Heads, All Examining Personnel, and Other Interested events


Any office of this Comptroller associated with the Currency (OCC) is issuing this guidance to describe safety and soundness measures that nationwide banking institutions and federal cost cost savings associations (collectively, banking institutions) should follow if they provide taxation installment loans in illinois refund-related items. This guidance replaces OCC Bulletin 2010-7 (18, 2010), which transmitted the “OCC Policy Statement on Tax Refund-Related Products, ” but does not supersede or amend any other OCC issuances february.

Note for Community Banks

This guidance pertains to all OCC-supervised banking institutions that provide income income tax products that are refund-related.


The guidance outlines security and soundness measures banking institutions should follow when they provide income tax refund-related services and products. Those measures consist of

  • Making sure the financial institution’s board of directors keeps sound danger administration policies, procedures, and techniques to oversee all taxation refund-related items.
  • Applying effective interior settings and review requirements to promote and solicitations.
  • Providing disclosures that are appropriate explain material areas of the merchandise to customers.
  • Implementing appropriate diligence that is due adequate procedures to make sure that tax refund-related services and products given by third events conform to relevant guidance.
  • Making certain Bank Secrecy Act (BSA) conformity danger management systems cover income tax refund-related items.
  • Supplying training programs (including certification processes) that target regulatory demands, interior policies and procedures, and duties for keeping a compliance program that is effective.
  • Keeping sufficient money and liquidity amounts.
  • Developing prompt and management that is accurate systems (MIS) for income tax refund-related items.
  • Ensuring the financial institution’s conformity along with relevant legal guidelines, including those involving customer security.


The term “tax refund-related services and products” encompasses credit items, deposit items, and settlement services to transfer tax-related funds. Tax refund-related products present particular safety and soundness and conformity dangers, due to (1) their particular payment and expense structures and (2) banking institutions’ reliance on third-party taxation return preparers whom communicate with customers. With appropriate customer defenses and danger management controls that target safety and soundness issues, nonetheless, these items may possibly provide reasonable alternatives for clients.

Tax refund-related items can include some or all the features that are following

  • Item emerges through a taxation planning service.
  • Item is predominantly provided during taxation period.
  • Costs connected with taxation planning as well as other services or products are subtracted through the client’s income tax refund.
  • Consumer’s taxation reimbursement is employed to settle or collateralize the mortgage, or even to open a deposit or account that is prepaid.
  • Just a tiny portion of reports, exposed through the taxation period, stay active later on when you look at the 12 months.

You will find three primary forms of taxation refund-related services and products:

Credit items

Tax credit that is refund-related currently available on the market include the annotated following:

  • Reimbursement expectation loans (RAL), that are short-term loans built in expectation of an tax reimbursement being qualified and compensated because of the irs (IRS) or even a continuing state income tax authority. The mortgage is manufactured with a bank through third-party taxation preparers that provide both taxation planning solutions and RALs.
  • “Holiday loans” and “pre-file” or “pay-stub” loans, that are provided through third-party taxation preparers ahead of the client gets a W-2 type for the present 12 months. These loans display more credit danger than typical RALs because funds are advanced level predicated on past years’ earnings or perhaps a present pay stub.
  • Other bank programs that anticipate (even in the event they don’t necessarily require) loan payment from future income income tax refund proceeds.

Deposit products and prepaid access cards

Tax refund-related deposit items presently available on the market include the transmittal of the income tax reimbursement by the relevant taxation authority 1 to (1) a restricted or special-purpose deposit account that a bank establishes to issue a check into the client 2 or (2) a bank-issued prepaid access card. 3

Settlement solutions

Tax refund-related settlement solutions include the transmittal of a taxation reimbursement because of the applicable income tax authority to an account that is bank-controlled. The financial institution typically releases funds into the consumer after re payment towards the income tax preparer for the income tax planning solutions.

Safe and Sound Techniques regarding the Tax Refund-Related Items

This guidance addresses noise underwriting and system administration methods for banking institutions offering tax refund-related services and products and it is in line with the premise that banking institutions should offer services and products that meet clients’ economic needs on a nondiscriminatory foundation and without subjecting clients to treatment that is unfair.

Banks’ danger management policies, procedures, and techniques for taxation refund-related items must certanly be (1) commensurate utilizing the complexity and nature of these task; (2) in keeping with safe and banking that is sound and appropriate reporting demands; and (3) undertaken with a admiration of and ability to deal with all applicable consumer protection and reputation danger factors, along with appropriate conformity responsibilities, linked to the task.

The chance administration principles established in this guidance are split into three groups: (1) danger administration for many income tax refund-related items; (2) supplementary danger management for taxation refund-related items involving an expansion of credit (taxation refund-related credit items); and (3) supplementary risk management for income tax refund-related services or products for transmitting a reimbursement (taxation refund-related deposit items).