HR Block 2014 Annual Report Download - page 23

H&R Block, Inc. | 2014 Form 10-K 15
However, there can be no assurances regarding the timing of consummation of the Divestiture Transaction, or whether
the Divestiture Transaction will be consummated at all. Until such time as the Divestiture Transaction is consummated,
HRB Bank remains subject to regulation, examination, supervision, reporting requirements and enforcement by the
OCC. The OCC can, among other things, issue cease-and-desist orders, assess civil money penalties and remove bank
directors, officers or employees, for violations of banking laws and regulations or engaging in activities it determines
to be unsafe and unsound banking practices.
HRB Bank is subject to OCC regulatory capital requirements. Failure to meet minimum capital requirements may
trigger actions by regulators that could have a direct, material effect on HRB Bank. HRB Bank must meet specific capital
guidelines involving quantitative measures of assets, liabilities and certain off-balance sheet items as calculated under
regulatory accounting practices. OCC regulations currently require HRB Bank to maintain minimum amounts and ratios
of tangible equity, total risk-based capital and Tier 1 capital.
The laws and regulations imposed by U.S. federal banking regulators generally involve restrictions and requirements
in connection with a variety of technical, specialized and expanding matters and concerns. For example, compliance
with anti-money laundering, know-your-customer requirements, and the Bank Secrecy Act, has taken on heightened
importance with regulators as a result of efforts to limit terrorism. There has been increased regulation with respect
to the protection of customer privacy and the need to secure sensitive customer information. Being subject to banking
regulation may put us at a disadvantage compared to our competitors which may not be subject to such requirements.
The OCC could deem certain products offered by HRB Bank to be "unsafe and unsound" and require HRB Bank, or
a third party on which we rely, to discontinue offering such products. The discontinuance of offering such products
would result in a loss of revenues derived from such products and to the extent such products are instrumental in
attracting clients to our offices for tax preparation services, we could experience a significant loss of clients should
such products be discontinued. This could cause our revenues or profitability to decline.
The Dodd-Frank Act created the CFPB to administer and, in some cases, enforce U.S. federal consumer protection
laws and expanded the role of state regulators with respect to consumer protection laws. Regulations promulgated
by the CFPB or state regulators may affect our bank and financial services businesses in ways we cannot predict,
which may require changes to our financial products, services and contracts.
The Dodd-Frank Act created the CFPB and gave it broad powers to administer, investigate compliance with, and, in
some cases, enforce U.S. federal consumer protection laws. The CFPB has broad rule-making authority for a wide
range of consumer protection laws that apply to all banks, federal savings banks, and other financial services
companies, including the authority to prohibit "unfair, deceptive or abusive" acts and practices. The CFPB has
examination and enforcement authority over all banks with more than $10 billion in assets and certain other companies
not regulated by the federal bank regulators. Banks with $10 billion or less in assets will continue to be examined for
compliance with the consumer laws by their primary federal bank regulators. HRB Bank does not currently have assets
in excess of $10 billion.
Although the CFPB has extensive rulemaking, investigative and enforcement powers that could impact our business
operations, the potential reach of the CFPB's authority on the operations of banks and financial services companies
offering consumer financial services or products, including our bank and financial services subsidiaries, is still
developing. The CFPB may examine, investigate and take enforcement actions against, our non-bank subsidiaries that
provide consumer financial services and products. The Dodd-Frank Act also expanded the role of state regulators in
enforcing and promulgating consumer protection laws, the results of which could be states issuing new and broader
consumer protection laws, some of which could be more comprehensive than U.S. federal regulations. New CFPB and
state regulations may require changes to our financial products, services and contracts, the effects of which cannot
be predicted.
The nature of our tax service and product offerings requires timely product launches. Any significant delays in
launching our tax service and product offerings, changes in government regulations or processes that affect how
we provide such offerings to our clients, or significant problems with such offerings or the manner in which we
provide them to our clients may harm our revenue, results of operations and reputation.
Tax laws and tax forms are subject to change each year, and the nature and timing of any such changes are unpredictable.
As a part of our business, we must incorporate any changes to tax laws and tax forms into our tax service and product
offerings, including our online tax services and tax preparation software. The unpredictable nature and timing of