By James B. Kelleher and Ed Leefeldt
NEW YORK (Reuters) - Specialty finance companies that target low- and moderate-income customers with high-fee products like payday loans and tax-refund advances may be controversial -- but they're not going away.
Industry executives and regulators participating in this week's Reuters Banking Summit said there is simply too much demand from clients living on the financial edge -- and plenty of good reasons to keep the fees on the products where they are.
While meeting that demand from consumers who need quick cash can be expensive and risky, and frequently draws the ire of regulators and other watchdogs, there's too much money to be made in that space to stay away, they said.
"We find ourselves in this odd kind of middle ground," Mark Ernst, the chairman and chief executive of H&R Block Inc. (HRB.N: Quote, Profile, Research, Stock Buzz) told the Reuters Banking Summit in New York.
"We're stuck between consumer watchdogs who would like to tell us how we ought to serve clients and consumers who want to be served the way they want to be served."
This week, H&R Block was reminded how hot that odd place can get when New York Attorney General Eliot Spitzer filed suit against it, claiming the company defrauded half a million customers by steering them into individual retirement accounts.
The lawsuit, which seeks damages of $250 million plus refunds, comes on top of unrelated suits H&R Block faces in California and Illinois as a result of its refund-anticipation loans, which provide taxpayers with instant advances on their tax refunds.
FRUSTRATED BUT RESIGNED Continued...
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