An End to Refund Anticipation Loans in 2013???

Hopefully this article is correct! The office here at EA Schensky has spent countless hours counseling folks on the costs involved in these “free” services to obtain “instant” refunds. The cost to gain access to one’s money a week to ten days earlier than ordinary processing has seemed like usury to us for A LONG TIME! eas
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The National Consumer Law Center and the Consumer Federation of America are predicting that this year’s tax season will be the final one that refund anticipation loans (RAL’s) will be available on a large-scale, nationwide basis.

Consumer advocates have long warned against the use of RALs, arguing that they amount to high-interest loans targeted at low-income taxpayers. RAL providers began falling by the wayside last tax season after the loans became riskier for lenders to provide.

The Internal Revenue Service removed the debt indicator last tax season indicating whether a borrower owed money to the federal government for delinquent taxes, unpaid child support, or delinquent federally funded student loan payments Banking regulators and investors have also put pressure on RAL lenders like Santa Barbara Bank & Trust, HSBC and Republic Bancorp in recent years to quit the business.

H&R Block is offering a “rapid refund” program this year, and though they claim it isn’t a loan and doesn’t charge interest, critics say the expense is hidden within the preparation fee.

Posted in Blog.

12 Comments

  1. This will not be the end!! Tax preparers will start offering these products through private lenders not associated with FDIC. These types of agreements are already in the works. Unfortunately due to not having the capital as large banks do these private lenders will have to charge even a higher fee to assume the risks of these loans. So for all of those who worked hard to end the RAL’s through the banks….Way to go!!! They are still going to be their but just more expensive. A job well done!!

    • Our opinion is that the fees assessed to the clients are burdensome. With electronic filing obtaining refunds is a week to ten days (although often longer than that this year with the identity theft precautions that are newly in place), our position is that the fees do not justify the service. But thanks for your thoughts on the matter.

  2. I liked the RAL. It cost quite a bit, but i didn’t really mind. Most of the time i REALLY needed the money, and since the banks wouldn’t loan a poor person a desperately needed loan before taxes, i loved going in and getting my refund that day, then it changed to the next day, but i’d gladly pay $300 for that. Now i have to wait for the unreliable IRS, not knowing if i’m “really” going to get my refund the day they say or not.

    • If you are willing to wait for 7 to 10 days, you will end up with an extra $300 in your pocket!

      We are sure that private lenders will step in to allow the continuation of RAL’s. However our opinion is still that the fees do not justify the speed. But everyone needs to make their own decision relative to their particular situation.

  3. i wish people would just mind there own business if you dont want the loan dont get it but for people that need it its good for them,people today have nothing better to do then find something they dont like and run there mouth

    • Exactly! It never bothered me what it cost, to me it was no big deal! People need that money badly and for them to stop it is stupid!!!

  4. Of course these loans are convenient.  But when you factor in the cost of just buying the program yourself and just waiting a few more days.  It just does not make sense.  I did the RAL for years because I did not know any better.  Now that I realize I get my refund in about 7-10 days, I spend about 40 dollars instead of paying over 300.

  5. Sorry… just noticed this comment about a 21 day turn around for refunds. It is not quite correct that refunds would take “at least 21 days”. IRS has said that last year they processed refunds on average within 21 days and expect the turn around to be the same for this current year. There are exceptions to everything… We have seen refunds arrive in less than a week… or be held up for months… but the 21 day turn around was an average.

  6. Pingback: Peter

    • Thanks so much Peter! We work very hard to make the information factual, readable and interesting. We look forward to your input… All questions are welcome! Happy corporation deadline day!

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