Refund Anticipation Loans May Be Facing Their Last Year

    HACKENSACK, NJ, November 10, 2011 /24-7PressRelease/ -- One of the most abusive practices tax preparation firms engage in is the Refund Anticipation Loan, otherwise known as RAL. These anticipation loans are given to taxpayers in expectation of receiving a tax refund.

A few years ago, it took a few months for taxpayers who qualified for a tax refund to receive their check in the mail. At the time, RALs may have made sense. For those needing the cash as soon as possible, it may have been worth paying the necessary fee to obtain the refund anticipation loan. However, today, taxpayers are able to receive a refund in a matter of weeks or days, so the RAL is not really a necessity.

The refund anticipation loans are made by banks, facilitated by tax preparers and secured by the taxpayer's expected tax refund. These RALs may sound like a blessing to those who are strapped for cash, but they carry some hefty baggage. Oftentimes, the APR of these loans can easily reach the triple digits and they are extremely risky if the taxpayers' refund is not what they expected it to be.

Recognizing this high-cost, high-risk option, many consumer advocates consider RALs to be abusive, provide no economic function, and should banned. Within the last year, many major changes have occurred in the RAL industry: the IRS eliminated a service, called the debt indicator, that helped tax preparers make RALs by indicating whether a refund could be intercepted for certain debts; JPMorgan Chase, a major RAL lender, left the RAL market. The FDIC even notified RAL-lending banks that attempting to make RALs without the debt indicator is "unsafe and unsound."

Even with these risks, RALs are still quite attractive to the low-income taxpayers. But is it really worth it? The price for a typical RAL for a loan of $1,500 is $61.22; not including the $29.95 for a refund anticipation check for the remainder of the consumer's refund. In addition, this $61.22 carries an APR of 149%. In 2009 alone, taxpayers paid about $606 million in RAL fees. They are basically borrowing their own money at an extraordinarily high interest rate.

Given the current state of RALs, it is no wonder there have been lawsuits. In one class action lawsuit, Harper v. Jackson Hewitt, a consumer alleges that H&R Block and Jackson Hewitt's violated state Credit Services Organization laws by facilitating RALs. The CSO laws regulate both credit repair organizations and "any person or organization who assists or offers to assist consumers in obtaining an extension of credit." The West Virginia Supreme Court held that this provision covers tax preparers who offer to arrange RALs.

A New York firm, Trief & Olk understands the predicament that these tax refund loans cause. Many people are strapped for cash in these hard economic times. The tax refund loans look very attractive to those who need cash now to help pay for long overdue expenses. Simply put, RALs can easily take advantage of those who need the cash the most.

The New York firm also has information on their site that specifically pertains to RALs and its legal and ethical remises. This information can be found at http://www.triefandolk.com/tax-refund-loans.html.

Trief & Olk has tried numerous complex jury and judge trials in federal and state courts and successfully continued our representation through the appellate courts when necessary. Trief & Olk takes a team approach to every case we accept. Our lawyer-to-case ratio is extremely high, thus assuring the degree of personal attention and thoroughness for which our firm is known. For additional information, please call Trief & Olk at their New York office at (212) 486-6060 or visit the office in person with an appointment at 150 E. 58th St., 34th Floor, New York, NY 10155. You can also call their New Jersey office at (201) 343-5770 or visit in person at 9 Kansas St., Hackensack, NJ 07601 with an appointment.

Website: http://www.triefandolk.com

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