Borrowers Beware

A phalanx of banking reform activists met with Pacific Bancorp CEO George Leis to discuss a type of short-term loan that the group characterized as predatory upon the poor: the tax-refund anticipation loan (RAL). Headquartered in Santa Barbara, Pacific Bancorp is the parent company to Santa Barbara Bank and Trust (SBB&T), which is one of the nation’s three main RAL lenders, the other two being JP Morgan and HSBC. The San Francisco-based California Reinvestment Coalition (CRC) spearheaded the delegation, which included representatives from like-minded organizations from the Midwest and the East Coast. They met with Leis and other top management for two hours on Friday morning, October 19.

Leis and Debbie Whitely, Pacific Bancorp’s executive vice-president and director of investor relations, said in a joint interview with the Independent that refund anticipation products made up 56 percent of SBB&T’s 2006 after-tax income; that figure was 36 percent the year before, and is expected to fall somewhere in between for 2007. “These are very, very, very popular products,” said Whitely.

In April, shortly after Leis took over leadership of Pacific Bancorp, the SBB&T stopped making so-called holiday loans, at least partly due to pressure from the CRC. These had been available starting in November of each year, based on estimated tax refunds as calculated by the borrowers’ pay stubs. By contrast, the RALs that SBB&T still offers are based on the borrowers’ W2 forms. In discontinuing the holiday loans, SBB&T followed the lead of JP Morgan and HSBC, who are still the nation’s top two RAL lenders.