Media Contact, Janet C. Hart, CFEE (704) 927-8617 office
Charlotte, N.C. – February 20, 2009 – Are you planning to do your taxes this
weekend? If so, the BBB has some advice for you. With consumers experiencing financial
challenges, more people are doing their taxes early because they need their refunds
now. This urgent need is leading to booming business for Refund Anticipation
Loans (RAL) also known as “money now loans.”
anticipation loan is an advance based on the amount of your refund, less fees
and interest charged by the tax preparation service offering the loan. While
RALs might be a good source of instant cash, The Better Business Bureau warns
that they come at a high cost.
Consumer Law Center (NCLC) found that the effective annualized rate (APR) for a
refund anticipation loan can range from about 50 percent to nearly 500 percent and some companies tack on
additional administrative fees. According to the NCLC, consumers took out more
than nine million RALs in 2006 and paid nearly $1 billion in fees and interest
on these loans.
“Taxpayers who need
their tax refund money right now may not consider that their instant refund
comes at a high price,” said Tom Bartholomy, president and CEO of The Better
Business Bureau of Southern Piedmont. “If taxpayers filed online, they would
receive their refunds in approximately ten days and would save a substantial
amount in interest and fees incurred with a refund anticipation loan.
loans have come under scrutiny in recent years. The IRS is considering the need
to create regulations and restrictions governing these types of loans. A
representative from one of the leading tax preparation services in the nation,
H & R Block, said in a written statement to MSNBC.com, “we believe the best
option for our clients is to file electronically and receive their refund via direct
deposit, rather than take out a refund anticipation loan.”
If you are
considering an instant refund loan, the BBB offers the following advice:
- Why not e-File and use
Direct Deposit? The
fastest and most secure way for you to get your refund is to file your taxes
online and then allow a direct deposit of the refund into your bank
account. Taxpayers can have the money in eight to 15 days.
- Don’t fall for debit cards. Some
tax preparers offer to provide instant refunds on “convenient” debit cards.
However, these cards include hidden fees, as high as $20 per transaction,
and can have limits on how much money you can access, which means you
would incur the high transaction fees over and over again.
- If you absolutely need
your refund now, shop around for the best deal. Fees and interest rates for RALs
vary by tax preparer.
- Check with the BBB
first. Before you
sign a contract, be sure to check out the tax preparer’s record of
integrity and performance at www.bbb.org.
It’s fast, easy and free.