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To Whom It May Concern:
It has come to the attention of the Division of Banks (Division) that some tax preparers are offering extensions of credit for Massachusetts consumers in the form of 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 broker 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 assisting in making a small loan 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), 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. 1540.
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. 1542.
Very truly yours,
Thomas J. Curry
Commissioner of Banks