Tax Refund Anticipation Loans: High Interest & Fees for the Working Poor

Tax season won't be underway until January, but there was a big line Thursday in front of one H&R Block branch (in Wyoming, Michigan).

The company has been pushing its line of credit called the Emerald Loan, (an income tax refund anticipation loan or RAL). Typically, the market for these products are low-income earners who often get tax refunds that can be used to pay off the loan, consumer groups say.

But there is some concern customers may be purchasing expensive tax preparation services they can't afford, or digging themselves deeper into debt.

www.woodtv.com/dpp/your_money/Loans-from-tax-prep-chains-Demand-up

The Better Business Bureau:

"... cautions consumers to consider the complete costs of a RAL and how these loans can wipe out a significant portion of a tax refund.

“RALs are short-term loans with exorbitantly high interest rates and hidden administration fees, so consumers are actually paying someone else to have access to their own money.

However, if the refund is less than anticipated or the RAL is not paid off in time, the fees can take a significant chunk out of the refund.”

A RAL is similar to a payday loan, with interest rates averaging between

50 and 500 percent.

They sometimes are offered by fly-by-night tax preparers. Consumers still can obtain income tax refunds, free of charge if they are willing to wait two weeks...

The fastest and most secure way for consumers to receive a tax refund directly is to file tax returns online and allow direct deposit of

the refund to their bank account. This can take as few as eight to 15 days."

ct.bbb.org/article/income-tax-refund-anticipation-loans-15231