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Building a Better Refund Anticipation Loan: Options for VITA Sites

November 1, 2004
Refund Anticipation Loans

Refund Anticipation Loans, or RALs, are an extremely popular means for taxpayers to access their refunds more quickly than waiting for a paper check or even direct deposit. The negative effects of these loans—including their cost and lack of consumer protections—are well documented. Many consumer advocates and community development professionals are rightfully concerned about the popularity of these products, but also recognize that they can be useful to some filers. Fortunately, free tax preparation sites across the country are working to design and deliver RALs that promote the long-term financial health of low-income taxpayers through encouraging asset development and financial education. This document discusses the costly effects of the current RAL market, makes the case that a well-designed RAL program can actually benefit consumers, and provides guidance on evaluating and developing a worthwhile RAL program.