RISK FACTOR BORROWING AGAINST ANTICIPATED TAX REFUND CAN BE FOOLHARDY AND COULD COST YOU PLENTY.Byline: Jabulani Leffall Staff Writer It's all about the quick cash. That's what some Southland tax preparation firms are selling this tax season. But when it comes to the controversial Refund Anticipation Loan A (Tax) Refund Anticipation Loan (RAL) is a high interest rate short-term loan secured by a taxpayer’s expected tax refund. United States In the United States, the taxpayer commonly applies for the loan through a paid tax preparation firm. - a cash advance on your tax refund Tax refund Money back from the government when too much tax has been paid or withheld from a salary. - getting quick money may not be the best thing to do. Consumer advocates have cried foul since the inception of this practice, but businesses that offer it argue it's just a short-term loan that customers have the right to refuse or to take if they need money fast. At California Insurance & Tax Preparation in Rancho Cucamonga Rancho Cucamonga (răn`chō k  'kəmäng`gə), city (1990 pop. 101,409), San Bernardino co., S Calif. ,
fees on what is essentially the tax-return equivalent of a payday loan A payday loan or paycheck advance is a small, short-term loan that is intended to cover a borrower's expenses until his or her next payday. Typical loans are between $100 and $1500, on a two-week term and have interest rates in the range of 390 percent to 900 percent range from $64 to $99.
``Doesn't make any difference to me what clients do,'' said owner Ana Alvarez. ``Except that some clients prefer the rapid-refund service and come to me on that condition.'' Michael Duvall, owner of Duvall & Company in Long Beach, says his clients tend to be more sophisticated and that he doesn't offer the rapid refund. Duvall said he would encourage anyone seeking such a loan to find out what they'd owe in the end before accepting any money. For its part, the Internal Revenue Service neither endorses nor decries the rapid refund, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. area spokesman Victor Omelczenko. ``But what we do encourage folks to do is file electronically,'' he said, ``and they can get their refund in two weeks or less, which isn't that much time.'' Advocacy groups say consumers, in getting the quick buck, fail to realize they've taken out a loan that they are obligated ob·li·gate tr.v. ob·li·gat·ed, ob·li·gat·ing, ob·li·gates 1. To bind, compel, or constrain by a social, legal, or moral tie. See Synonyms at force. 2. To cause to be grateful or indebted; oblige. to repay even if their refund turns out to be less than expected or if they wind up owing the government money. RALs, as the loans are often called, are high-cost loans made by banks and secured by the taxpayer's refund. The life of the loan is usually 10 days. According to a report released this year by the National Consumer Law Center and the Consumer Federation of America The Consumer Federation of America (CFA) is a non-profit organization founded in 1968 to advance the consumer interest through research, education and advocacy. According to CFA's website, its members are approximately 300 consumer-oriented non-profits, which themselves have , a refund loan of about $2,000 will cost $132 in interest fees - a 180 percent interest rate if annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. . Additionally, loan recipients can expect an APR APR See: Annual Percentage Rate (annual percentage rate) of 240 percent if tax preparation fees are factored in. At Bankrate.com - a Web site for calculating local and national rates - interest rates for standard bank loans, mortgages, equity lines of credit and automobiles for Southern California Southern California, also colloquially known as SoCal, is the southern portion of the U.S. state of California. Centered on the cities of Los Angeles and San Diego, Southern California is home to nearly 24 million people and is the nation's second most populated region, , which all linger in the 5 percent to 6 percent range, are paltry in comparison with the high tax refund loan rate. ``It's just like rent-to-own furniture and payday loans,'' said Jean Ann Fox of the Consumer Federation of America. ``It's hard to even justify doing this, from a banking perspective, but it happens as soon as the W2s hit the mailboxes.'' The inception of these loans came about in the late 1970s when Household Inc., a large commercial lender Whilst nearly all lenders offer loans on a commercial basis the term commercial lender has differed meanings around the world.
Later on in the 1980s and early '90s, the issuance of anticipation loans took off with the advent of electronic filing and gained momentum with the expansion of the Earned Income Tax Credit The United States federal Earned Income Tax Credit (EITC) is a refundable tax credit that reduces or eliminates the taxes that low-income married working people pay (such as payroll taxes) and also frequently operates as a wage subsidy for low-income workers. Program. Subsequently, tax-preparation firms formed joint ventures with high-interest financial-services groups. This created the current framework for such loans. The Consumer Federation of America and the National Consumer Law Center estimate that one in 10 American taxpayers takes out these types of loans. However, it still comes down to a choice and some consumers are just too eager for money, said Chi Chi Wu, a lawyer from the National Consumer Law Center. ``We got involved because there is an amazing growth of the people taking out these loans,'' said Wu. ``Education about the loans will only do so much. People need to know that there's no justification for taking out a loan like this, and state and federal governments have to want this to change.'' State Attorney General Bill Lockyer William Westwood "Bill" Lockyer (born May 8, 1941) is the current State Treasurer of California. Prior to this, he served as California's Attorney General and head of the Department of Justice for the U.S. state of California. has come out against the rapid refund, telling consumers to avoid the preparation firms that offer anything close to these types of loans. Yet, Joe Curiel, manager of education for the Consumer Credit Counseling Service of Los Angeles, says consumer need often trumps rhetoric. ``If I was a consumer who needed the money for a pressing need, then I might be in a position to take it,'' said Curiel. ``But patience is a virtue and, good or bad, people are agreeing to these terms. If the loan goes bad, it's not going to go away.'' Jabulani Leffall, (818) 713-3699 jabulani.leffall(at)dailynews.com CAPTION(S): drawing Drawing: (color) Risk factor Jorge Irribarren/Staff Artist |
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