"As tax season shifts in to full swing, the National Consumer Law Center (NCLC) and Consumer Federation of America (CFA) have issued their eleventh annual report on the tax-time financial products industry: Something Old, Something New in Tax-Time Financial Products: Refund Anticipation Checks and the Next Wave of Quickie Tax Loans. The good news? For the first time in decades, millions of taxpayers will avoid having their refunds drained by refund anticipation loans (RALs), which are no longer available from banks on a large scale, nationwide basis. The bad news? Taxpayers are still at risk of needless fees from tax-time refund products, such as:
- RALs from fringe, non-bank lenders – Some payday and other high-cost lenders are offering RALs. These loans could be more expensive and riskier than bank RALs.
- Shady tax preparers offering phantom RALs – In 2012, some preparers promoted RALs, but apparently did not have the financial capacity to make them to a large number of customers. These RAL offers were allegedly bait-and-switch schemes to get customers into their offices.
- Refund anticipation checks (RACs) – RACs do not deliver refunds any faster than the IRS can, yet cost $30 to $55 delivered via check. Some preparers charge add-on fees which can range from $25 to several hundred dollars."