Conformed
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported) February 21, 1995
Beneficial Corporation
(Exact name of registrant as specified in its charter)
Delaware 1-1177 51-0003820
(State or other jurisdic- (Commission (IRS Employer
tion of incorporation) File Number) Identification No.)
301 North Walnut Street, Wilmington, Delaware 19801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (302)425-2500
No Change
(Former name or former address, if changed since last report)
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Item 5. Other Events.
The following is the text of a press release of Beneficial
Corporation, a Delaware corporation, issued on February 21, 1995:
BENEFICIAL CORPORATION EXPECTS EARNINGS IMPACT FROM
TAX REFUND ANTICIPATION LOAN BUSINESS
- Beneficial National Bank Will File Lawsuit Against
the Internal Revenue Service Today -
February 21, 1995
WILMINGTON, Del. -- Beneficial Corporation (NYSE: BNL) today announced
that the recent actions by the Internal Revenue Service to suddenly
change the manner in which the Service processes the earned income tax
credit (EITC) portion of the tax refunds of hundreds of thousands of
taxpayers are likely to significantly influence the 1995 earnings of
Beneficial's tax refund anticipation loan (RAL) business.
Recently, the IRS began bifurcating the processing of many EITC-related
returns, delaying the payment of the earned income credit portion of
the refund to most taxpayers filing as either a head of household or as
a single taxpayer for a period the IRS states may be up to eight weeks
or longer. Apparently, more than a million tax returns are involved in
this bifurcation process, which the IRS implemented without adequate
forewarning to taxpayers or the tax return preparation and RAL
industries.
Although Beneficial National Bank, the Company's subsidiary which makes
RAL loans, ceased extending RAL loans on the EITC portion of taxpayer
refunds immediately when its own internal analysis detected the first
signs of the IRS change on February 4, it now appears that a
significant number of affected RALs -- perhaps as many as 350,000 --
were processed in full before the IRS change could be identified.
Finally, of particular significance, on February 16 the Internal
Revenue Service confirmed that, when finally released, the retained
EITC portion of the returns will be sent to taxpayers as paper checks,
rather than sent directly to Beneficial National Bank to pay off the
applicant's RAL loan, as the taxpayer had directed the IRS. Senior IRS
officials now state that "computer-related problems" prevent it from
following the taxpayer's instructions in this matter, notwithstanding
clear indications to the contrary by the IRS' own programming
technicians.
Finn M.W. Caspersen, Beneficial Corporation's chairman and chief
executive officer, stated, "The Service's decision to divert these
refunds to paper checks mailed directly to the consumer creates obvious
significant collection problems, even though the consumer will have
been effectively paid twice. Prior to the IRS action, we had forecast
a $15 million pretax profit from the RAL business. Given the IRS
action, we now believe that the RAL business may well generate a net
loss in 1995. At best, it will approach breakeven and, at worst, could
suffer a loss of up to $80 million pretax, with the outcome depending
on the success of collection efforts.
"This wide swing of expected results illustrates the inherent
volatility of the RAL earnings stream -- particularly so this year,
given the IRS's precipitous and ill-advised actions with regard to
electronic filing. Moreover, from a public policy perspective, it is
also quite unfortunate that millions of low-income taxpayers are
suffering from not only reduced availability of such services, but also
from long-delayed refunds due to the arbitrary and capricious action of
the IRS in changing the ground rules for earned income tax credit
refunds in the middle of the tax season, with no adequate warning to
taxpayers or other interested parties.
"Accordingly, Beneficial National Bank will file a lawsuit today in
Federal Court in Wilmington, Delaware, seeking a temporary restraining
order and preliminary and permanent injunctions requiring the Internal
Revenue Service to honor the direct deposit instruction of the taxpayer
and for other relief. Should Beneficial National Bank prevail in this
litigation, it would appear that our original planned earnings level
could be exceeded."
Beneficial Corporation is a $14 billion, New York Stock Exchange-listed
financial services holding company. Subsidiaries of the Company
provide financial services through their various consumer finance,
banking and insurance operations located throughout the United States,
Canada, the United Kingdom and Germany. The Beneficial finance system
includes more than 1,000 offices offering products and services that
meet a broad range of consumer credit needs, including credit-related
insurance.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
BENEFICIAL CORPORATION
(Registrant)
By /s/Thomas P. McGough
Thomas P. McGough
Senior Vice President-
Finance and Treasurer
Dated: February 21, 1995
