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U.S. PIRG Consumer Blog
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January 18, 2008
New York seeks to prohibit costly tax refund anticipation loans
The New York Times is reporting in a story State Makes Bid to End Costly Tax-Refund Loans by Nicholas Confessore that that New York state has filed civil rights complaints against two large tax preparation firms -- Jackson Hewitt and Liberty Tax Service. New York officials filed civil complaints on Thursday against two tax preparation firms that offer high-interest loans against income-tax refunds, saying the companies had aimed the loans at low-income black and Hispanic families and military families in violation of state antidiscrimination laws. Tax preparation firms have made billions of dollars in profits by siphoning funds intended from the Earned Income Tax Credit (EITC) intended for low-income taxpayers into their own coffers. They do this by promising instant tax refunds through Refund Anticipation Loans (RALs), and charging triple-digit interest and fees for them, even though the IRS itself will issue refunds for free in ten days or less. These complaints based on the civil rights laws appear to be an innovative approach to ending the wealth-depleting skimming practices that take money from every taxpayer. According to a 2006 National Consumer Law Center and Consumer Federation of America report, over $900 million of the $1.6 billion in RAL fees paid in 2004 was siphoned out of the EITC, an important anti-poverty program that all taxpayers pay for. Previous blog on RALs and EITC. I can't find the filings on either the Division of Human Rights or Attorney General Andrew Cuomo's websites yet.
Posted by Ed Mierzwinski at January 18, 2008 09:36 AM
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