Well the end of the year is fast approaching and before you know it tax season will be upon us again.  As I prepare for the upcoming season, I having been in debate on a tough topic.  I am trying to decide whether to offer Refund Anticipation Loans(RALs) for the upcoming season.

The past year has really brought the issues with this bank product to the forefront.  H&R Block stopped offering this product last year because the bank backing them, HSBC was ordered to stop making these loans.  However, these loans were still offered by Jackson Hewitt and Liberty Tax Service and other tax preparers via their software supplier, such as Drake and CCH Taxwise. 

A couple of things happened that caused these issues with the decline in the RALs.  First the IRS stopped providing preparers with the "debt Indicator" which warned whether taxpayers had financial obligations that would cause their refunds to be intercepted by the IRS.  Regulations efforts by the FDIC about the practice.  The top lenders stopped offering RALS last year such as Chase, SBBT, and HSBC.  The only one currently offering the product is Republic Bank and Trust.

The FDIC is seeking to impose a $2 million fine against Republic.  Republic is appealing this decision and plans to continue offering the product for the upcoming season.

With this in mind, I don't think the RAL is a good idea.  Due to the added cost and fees I will offering this product.  It is likely to not even be an issue after next year pending the result of the Republic case.  Furthermore, I think these loans are predatory.  There are more less expensive ways to get your refund than paying these enormous loans fees.  In general it depending on the timing you can having you refund direct deposited into your bank account with 7 days.  Just being a little patient can save you a lot of money.  It is also my understanding that the Treasury Department is planning to offer a debit card program whereby your refund will be deposited onto this card by the IRS.  I believe this is pilot program directed initial to low income families probably without a bank account.  I will have to check into the status of this program. 

I am looking forward to a successful tax season.  Looking forward to hearing from you.  Tell me your thoughts on this subject.

Thanks,

Arrow Tax Service
www.arrowtaxserviceplus.com


(Source:  National Consumer Law Center, US Treasury Department)