By the Division of Banks

December 23, 2003

To Whom It May Concern:

This past March, the Division of Banks (Division) wrote to Massachusetts tax preparers regarding a product called a Refund Anticipation Loan (RAL). A RAL is a short-term loan based on the expected value of a consumer's tax refund. Some tax preparers have brokered RALs through third parties.

Massachusetts General Laws chapter 140, section 96 governs small loans which are considered loans of $6000 or less with a 12% annual percentage rate (APR) or higher. Anyone making or anyone directly or indirectly assisting in making a small loan for a fee, commission, bonus, or other consideration, either from the consumer or from the lender, must be licensed by the Division. In addition, anyone making or brokering a small loan must abide by the Small Loan Rate Order which limits the interest rate on small loans to 23% APR.

Please be advised that if you currently make RALs available to your customers (regardless of whether or not you originate the loan) and receive any type of fee, you must cease such activity until you obtain a small loan company license from the Division. An application form is available on the Division's web site at www.mass.gov/dob. In addition, if you have specific questions regarding licensing, you can contact the Consumer Compliance Unit at (617) 956-1500, ext. 540.

Please be advised that failure to obtain the required license would subject the offender to the penalties described in Massachusetts General Laws chapter 140, section 110 which includes the provision that "[a]ny loan made or note purchased or endorsement or guarantee furnished by an unlicensed person in violation of said sections shall be void."

If you have currently offer RALs and have any concerns, please contact David J. Cotney, Senior Deputy Commissioner at (617) 956-1500, ext. 542.

Very truly yours,


Thomas J. Curry
Commissioner of Banks