HR Block 2012 Annual Report Download - page 25

The proposed capital requirements for SLHCs may require us to retain or raise additional capital, restrict our
ability to pay dividends and repurchase shares of our common stock and/or alter our strategic plans. See Item 1
for further discussion of the Dodd-Frank Act.
HRB Bank is subject to extensive federal banking laws and regulations. If we fail to comply with
applicable banking laws and regulations, we could be subject to disciplinary actions, damages,
penalties or restrictions that could significantly harm our business.
HRB Bank is 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 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 require HRB Bank to maintain
minimum amounts and ratios of tangible equity, total risk-based capital and Tier 1 capital. On June 7, 2012, the
OCC issued a notice of proposed rulemaking increasing capital requirements for federal savings banks,
including HRB Bank. We are still reviewing how the OCC’s proposed regulations would affect HRB Bank and its
business.
The laws and regulations imposed by 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 and 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 are not subject to such requirements.
The OCC could deem certain products offered by HRB Bank to be “unsafe and unsound” and require HRB
Bank to discontinue offering such products. 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 enforce all federal consumer protections
laws. Regulations promulgated by the CFPB 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 also created the CFPB with broad powers to administer and enforce all 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. Banks with $10 billion or less in assets will
continue to be examined for compliance with the consumer laws by their primary bank regulators. HRB Bank
does not currently have assets in excess of $10 billion.
The CFPB has extensive rulemaking and enforcement powers that may impact our business operations.
Specifically, the CFPB may examine, and take enforcement actions against, our non-bank subsidiaries that
provide consumer financial products and services. New CFPB regulations may require changes to our financial
products, services and contracts. The potential reach of the CFPB’s broad rulemaking powers and enforcement
authority on the operations of banks and financial services companies offering consumer financial products or
services, including our bank and financial services subsidiaries, is currently unknown.
H&R BLOCK 2012 Form 10K 11