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Congress Misses the Point: FDIC Wrongfully Attacked, Instead of Predatory Product

Wednesday, March 16, 2016
Michael Calhoun

The House Financial Services Committee continues its assault on regulators that fulfill their responsibilities to address predatory, high-risk financial practices. Today the Committee attacked the FDIC for curbing banks' involvement in tax refund anticipation loans. These products carry interest rates as high as 500% APR, posing clear consumer protection concerns as well as safety and soundness risks to the handful of banks involved in them.

Mike Calhoun, CRL's President, issued the following statement:

Tax refund anticipation loans preyed on low-income consumers by charging extraordinarily high prices – as high as 500% APR – in exchange for receiving tax refunds a little early.

The handful of banks offering these loans disregarded the borrower's ability to pay because the refund was direct-deposited into the borrower's account a week or two later. As the bank repaid itself, it also collected high fees directly from the refund. Often, these refund loans were sought by lower-income consumers qualifying for Earned Income Tax Credits.

High fees and disregard for borrowers' ability to repay the loans appropriately raised red flags about the propriety of the product. Third-party relationships, like those with tax preparers, pose heightened risks. The FDIC acted responsibly and should continue to take action when banks engage in suspect and predatory practices.

For more information, or to arrange an interview with a CRL expert, please contact Charlene Crowell at or 919.313.8523.