Watch Out for Tax Refund Loans
February 8, 2008
Consumers who are eager to get their tax refunds back as quickly as possible may be tempted to use what are called refund anticipation loans. These are also known as RAL’s. In essence, these short term loans let consumers borrow against the refund amount that they expect to receive from the IRS. But these loans are not free. In fact, they can be very expensive.
In an announcement made last month, the IRS and the US Treasury Department reported that they are thinking of implementing restrictions on these types of loans.
Consumer tax preparers such as H&R Block are seeking ways to expand how they can offer such loans to consumers. The company would like to contract with retailers to market these RAL’s and is working hard in some states to get lawmakers to exempt certain retailers from registering with the states.
Denny Eliason, a lobbyist for H&R Block, told Washington state lawmakers last week that retailers such as payday lenders, personal check cashing companies, insurance agents, and certain community groups would only act in a clerical capacity. They would hand out applications but would not offer any tax advice to consumers. Under the plan, a tax professional would do the actual tax preparation and handle loans through a toll-free telephone number.
Consumer advocates have responded by saying that they do not want an explosion of these short-term, high-interest loans companies springing up unchecked and unregulated