Patrick-Murray Administration's Division of Banks Leads National Effort Opposing Refund Anticipation Loans
Quicker refunds through electronic filing lessen need for high-interest loans
BOSTON - The Patrick-Murray Administration's Division of Banks led an effort to create a policy statement opposing high-interest refund anticipation loans (RAL) published last month by the Conference of Bank Supervisors and the American Council of State Savings Supervisors.
A refund anticipation loan is a loan borrowed against the amount of a consumer's anticipated income tax refund, and often includes fees to be paid to the tax preparer and extremely high interest rates for the financial institution. High-rate RALs have the potential to be very costly to consumers. This product tends to be targeted to low-income borrowers who may qualify for the Earned Income Tax Credit, which is a tax credit for low- to moderate-income individuals.
"The people of Massachusetts are entitled to receive their tax refunds in full," said Governor Deval Patrick. "This is why my administration has come out in opposition to this predatory behavior, primarily targeting those most in need."
"Our administration recognizes the value of a tax refund for many Massachusetts taxpayers," said Lieutenant Governor Timothy Murray. "As tax season is upon us, it is imperative that we raise awareness about quick and free alternatives to the refund anticipation loan so taxpayers can hold onto their hard earned money."
"These loans offer no benefit or value to the consumer, and take money out of a refund," said Steven Antonakes, the Commissioner of the Division of Banks, who urged regulators to publish the policy statement. "With electronic filing and direct-deposit options, taxpayers can receive their full refund rather quickly."
"Paying an interest cost on your refund doesn't add up," said Navjeet Bal, the Commissioner of the Patrick-Murray Administration's Department of Revenue.
Barbara Anthony, the Undersecretary of the Office of Consumer Affairs and Business Regulation, said RALs may no longer serve a public interest.
"The rapid turnaround of refunds through direct deposit, sometimes as quickly as within two weeks, has made RALs unnecessary," Anthony said. "Consumers have alternatives well worth investigating. Filing electronically and getting a refund through direct deposit is the best way to get all of your money as soon as possible."
For more information about refund anticipation loans, read the Division of Banks' Consumer Advisory. Also, view a video from Lieutenant Governor Tim Murray on the subject.
The CSBS and ACSSS Policy Statement on RALs can be viewed here.