Tax Refund Anticipation Loans

Tough economy could spark surge in tax refund loans, By Tony Pugh, January 24, 2010, Miami Herald: “After several years of declining use, tax refund anticipation loans could make a big comeback this tax season with poor, cash-strapped taxpayers. Known as ‘RALs,’ refund anticipation loans are bank loans secured by the amount of a person’s expected income tax refund. Once a tax return is filed electronically by a commercial tax preparer, a third-party bank can provide the loan to the taxpayer in the amount of the expected refund. Various costs, fees and finance charges are deducted from the check, which usually arrives in three to five days – or within a few hours for an extra fee of $25 to $39. In turn, the IRS sends the taxpayer’s actual refund check to the bank to pay off the loan. The combination of widespread money woes, a sour economy and fatter tax refund checks for poor families could entice more people into taking the quickie loans, which have been one of the most pilloried financial products ever marketed…”