Refund Loan Products and VITA: A Summary of Issues and Options


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Published: November 1, 2004

In August, 2004, a group of people representing free tax preparation programs, national organizations and consumer advocacy groups met in Baltimore to discuss Refund Anticipation Loans (RALs). The meeting was hosted by the Annie E. Casey Foundation, a major funder of Earned Income Tax Credit (EITC) outreach and free tax preparation for low-income working families.

While the group represented a diversity of views, the overall sense of the attendees was that, attracted by the prospect of large tax refunds – mainly due to eligibility for the EITC -- tax preparers and financial institutions take advantage of low-income filers by aggressively marketing products that are often unnecessary at best and predatory at worst. At the same time, the group recognized that there is clear market demand for products that help filers receive their refunds more quickly. In fact, many of those present were experimenting with offering their own versions of quick refund products.

Following the meeting, a workgroup was established to think through these issues and develop guidance for the field. This document provides an executive summary of the workgroup’s output. It begins with a brief overview of tax refund products and then discusses the three major products: RALs, RACs and Stored Value Cards. It explores ways to design better versions of each product that meet market demand in a more consumer-friendly way. In addition, each topic provides a reference to a more detailed document with additional information.