REFUND ANTICIPATION LOANS

Many of the "Tax Shacks" offer high-interest Refund Anticipation Loans (RALs) sometimes called Rapid Refunds.  The people who obtain these loans are usually low-income people who are so impatient to receive their money that they will pay almost anything to get it a few days sooner.

If someone wants to pay an enormous amount of interest to obtain a loan, that's their business, but having the IRS aid and abet such a rip-off is where I take exception.  Apparently, the IRS has begun to realize the error of its ways and will no longer provide the banks which provide these loans a "debt indicator" so if the refund is denied by the IRS the bank would be left holding the bag.

One other feature of these loans were that the bank deducted the tax preparer's fee as well as their fees from the refund.  Since some people could not otherwise pay a tax preparer, the IRS is now considering allowing the tax preparation fee to go direct to the preparer and the balance to the taxpayer.  This would eliminate one other justification for RALs.

The only remaining incentive for anyone to take the RAL would be to get the money as soon as the return was prepared rather than waiting for a few more days.  After waiting 365 days for the refund, some people just can't wait another ten days!  So RALs may not entirely disappear but the banks will have to take a much bigger risk without the debt indicator, so this will greatly decrease this sort of fleecing the poor.