Refund Anticipation Loans
RALs May Gouge Your Wallet
Refund anticipation loans may carry interest rates as high as 500 percent. Ric Romero from KABC-TV Los Angeles reports on their cost.Tax Refund Anticipation Loans (RALs) are short-term cash advances against a customer's anticipated income tax refund. But the loans are offered at high interest rates, ranging from about 50% to over 500% APR.
They also only speed up the refund process by as little as one week, compared to what consumers can expect by filing online and having their refunds deposited directly into their banking accounts.
Tax preparers and lenders strip about $1.57 billion in fees each year from the earned-income tax credits paid to working parents, according to a study by the National Consumer Law Center.
Quick Links
Research
-
Borrowed Time: RAL Usage Among EITC Recipients in Native Communities
-
Building a Better Refund Anticipation Loan: Options for VITA Sites
Headlines
- Consumer Groups Urge Regulation of Nonbank Financial Institutions
New York Times, 03/05/10 - Legislation Would Shine Light on Tax Refund Loans
Baltimore Sun, 03/02/10 - Rapid-Refund Loans Dwindling
Fort Wayne Journal Gazette , 02/15/10 - Consumer Groups Warn About Tax Refund Loans
ABC News , 02/11/10
