Tax Refund Loans

Paying to borrow your own money

Through Refund Anticipatory Loans (RALs) tax preparers, such as H&R Block, pressure consumers to take out high-interest loans carrying annual percentage rates as high as 700 percent. Most of these consumers are recipients of the Earned Income Tax Credit (EITC) – which helps moderate the heavy income tax burden for poor families – whose households would benefit the most from this annual tax relief.

Tax preparers aggressively market “early tax refunds” primarily to America’s poor families. Consumers are misled to think of RALs not as loans, but as quick refunds. In fact, many consumers report that they are not told they could receive their tax refund, in full, within weeks. Not understanding the real terms of a refund anticipatory loan, poor families that qualify for the EITC accept the predatory loans with its high fees.

In Metro Atlanta, 15 percent of taxpayers qualified for the EITC in 1999, according to the most recent findings of The Brookings Institution. Of that group, 51 percent utilized a refund anticipatory loan. On average, RALs ate away at Atlanta’s EITC by 59.3 percent – almost two-thirds of the intended tax credit.

Ultimately, one-quarter of tax returns that would boost purchasing power in the state’s poorest communities goes instead into the pockets of wealthy out-of-state corporations.

Georgia lawmakers no longer can allow these companies to fatten their wallets at the tables of the working poor.