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WHAT'S DUMBER THAN 'REFUND ANTICIPATION LOANS'?

November 30, 2006

How about "pay-stub refund anticipation loans?"

Refund anticipation loans, issued against anticipated tax refunds after a return is prepared, are high-cost loans on a par with "payday" loans. Now there is a new product that combines these two forms of usury: the pay-stub RAL. A press release from two consumer organzations describes the product:

To receive a pay stub RAL, the taxpayer will have an estimated tax return prepared by the tax preparer based upon his last pay stub from the end of December -- hence the name "pay stub" RAL. The pay stub RAL is made based upon the anticipated refund shown by that estimated tax return. The holiday RAL is based upon a year to date pay stub from which a tax preparer can estimate whether the taxpayer will have a refund.

The press release says these things are offered "by all major players in the RAL industry." In addition to the ridiculous fees and interest rates on the loans, the loans lock the suckers borrowers into using the preparer to do the actual tax return.

The law allows consenting adults to do many stupid things, like refund anticipation loans, payday loans, and car title loans. The pay-stub RAL is just one more. Don't be stupid; avoid these loans.

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