Talk:Refund anticipation loan

NPOV alert

NPOV alert: 70.69.239.136 (talk · contribs) has been systematically removing information unfavorable to H&R Block. —Quarl ^(talk) 2006-03-02 04:35Z

I've temporarily blocked 70.69.239.136 (talk · contribs). —Quarl ^(talk) 2006-03-22 05:27Z

Controversy

Where are the 'supporter' arguements drawn from?

For example, supporters supposedly say that: "loans allow people access to funds immediately in cases of an emergency such as overdue medical bills, credit payments, and other debts while they wait for the IRS to process their income tax return" & "high fees are justified by the high risk associated with these loans, since there is a possibility that the IRS will issue a reduced refund or none at all, depending on whether the taxpayer followed the correct procedures in calculating his or her tax".

Any citations for these statements? Are is this just hearsay? —Preceding unsigned comment added by Econmists (talk • contribs) 06:30, 2 July 2008 (UTC)

Ronald Smith

The Refund Anticipation Loan system was first invented, developed and implemented in Virginia Beach, Virginia by an accountant named Ronald Smith in 1985 and was quickly copied by major tax firms across the United States and the world.

There is ample media coverage on Ronald Smith on CNN, Dateline, USA Today, etc. --Cool10191 (talk) 13:01, 29 January 2008 (UTC)

NPOV?

I added an NPOV tag to this article because I only see one sentence that talks about the support for this product. Everthing else in this article seems to be against the marketing or sale of this product.

I work for a tax preparation company, and do not push these on people, though we offer them. I explain to a customer all of their options, and let them chose the one that best fits their needs. The Georgetown study that is referenced in the article states in the Executive Summary that there are people who need this type of product, and, for the most part, they are the ones buying it.

I welcome all discussion on this topic. Thanks.--Keith 17:01, 22 August 2006 (UTC)

I agree the article needs more positive info to balance the criticisms; please go ahead and add information supporting this product, with references. —Quarl ^(talk) 2006-08-23 01:02Z

I notice that the neutrality tag has apparently been on the article for quite a while. I don't see a strong need for the tag at this point. Any comments, anyone? Famspear 20:17, 2 May 2007 (UTC)

Regarding the invention of refund anticipation loans, the patent was issued to an executive of Beneficial Corporation, which later merged with Household International, which in turn was acquired by HSBC. Beneficial worked closely with the IRS's electronic filing initiative, and the term "refund anticipation loan"(or RALS)was actually coined by the IRS in their initial document permitting the loans in 1987. The patent was granted on December 26, 1989, patent # 4,890,228, titled "Electronic Income Tax Refund Early Payment System". Three subsequent patents were issued in the 1990's. HSBC continues to be the major provider of these loans. While sometimes controversial, the longevity of the program and the millions of annual borrowers certainly attest to its popularity. Newjersyan 00:05, 30 July 2007 (UTC)

I've added extensive information that I believe rebalances the article in terms of neutrality, also provides some more specific information and examples. —Preceding unsigned comment added by 75.176.171.32 (talk) 08:10, 11 October 2007 (UTC)

This article is sufficiently neutral now, though not perfect, so I've gone ahead and removed the NPOV tag. fsiler (talk) 08:31, 21 February 2008 (UTC)

Citations added

I have added several citations to this page. One in particular - the one where it says certain banks are stopping pre-seasons loans because of pressure is definitely inaccurate. They are stopping the products because they are very unprofitable and because they are loosing money on them. I work in the lending industry and I hear things. —Preceding unsigned comment added by Cool10191 (talk • contribs) 21:30, 27 January 2008 (UTC)

I appreciate the effort, Cool10191, but blanketing an article with citation tags isn't nearly as useful as doing some quick googling and comparing the rates, for example, or adding a quick link about withholding. fsiler (talk) 08:30, 21 February 2008 (UTC)

I add citations to parts that I am quite certain are incorrect. For instance who ever figured these APRs used 10 days for the repayment date, when it is actually a minimum of 14 days at all RAL banks. And as i have said again and again, APR is not fair to categorize these products, it is a finance charge. If the person defaults and does not pay the loan back there is no interest, it is a one time fee! So what about the peopel who take the bank for a ride and take 10000, get charged $135 and do not pay it back until next year when they get another RAL? Then they jsut got a RAL for 1.35% interest rate, right? You never calculate an accurate APR when the repayment date is variable. 10 days is the absolute easiest the IRS will deposit, 14 days is the average, and 21 days is the theoretical "Max". I obviously cannot re-write this article because I am not at all neutral. But I am bringing it to your attention so someone else will.Cool10191 (talk) 18:46, 21 February 2008 (UTC)

I am sure that someone who pays back a year later is going to have substantial finance charges from the bank, but that's a tangential issue. The main, and undisputed, point is that the effective cost of capital for an RAL is exceptionally high. fsiler talk) 19:44, 21 February 2008 (UTC)

No actually, there is no additional charge for defaulting on the loan on any of the five, soon to be four, RAL banks, that is the difference between a finance fee and an actual loan interest rate. And that it costs a high APR, as I said is unfair and APRs are not intended by the FDIC to be used as a means of regulating short term loans. It is argued that high RALs are somehow translated to high profit margins, price gouging, or the like. The profit on a typical RAL is 15-20% of the total fee. That does not seem very outrageous to me. The price of a RAL is high enough for the bank to turn a FAIR profit, as is set forth by the FDIC. If the profit from a RAL was in violation of FDIC rules then they would be shut down.Cool10191 (talk) 16:24, 22 February 2008 (UTC)

I don't understand your point. I find it hard to believe that there are no additional charges for late payment. In any event, in the average, intended case, the interest rate imputed from the costs incurred is still extremely high, which tends to be the case with any kind of short-term time value of money problem (the implied interest rate on a 2/10, net 30 payment arrangement is 44.6%, for example). If you can produce reliable sources for your information then we should rewrite the article to explain the terms better. I was unable to locate any contracts for these loans online. fsiler (talk) 05:26, 6 March 2008 (UTC)

My original comment was the inaccuracy of the statement about offer RALs prior to January. That is incorrect. The other thing i said was the article computed APRs at 10 days repayment, not 14, and although it is still high, it is significantly lower that the currently listed APRs. And I do have a loan contract that I am getting this info off of. And no, there is not additional fees for late payment, RALs are not a typical loan. Cool10191 (talk) 13:31, 6 March 2008 (UTC)

Fine, produce sources for these and we'll fix the article: as I said earlier, adding a bunch of blank citations isn't terribly useful. What are the nominal rates from the banks (I would imagine it's prime plus quite a bit)? If you have a source for those we can compute an effective rate over a one year term, for example, though it needs to be clear that it's not a representative case. fsiler (talk) 21:55, 9 March 2008 (UTC)

Please only add existing examples quoted from objective, third-party sources meeting WP:RS. Computing rates from an external source to provide a unique example as suggested above is original research; Wikipedia articles reflect what's already out there; not content cobbled together to form/support original assertions. And please note that primary sources do not meet the criteria for sourcing content per WP:RS. Flowanda | Talk 01:28, 12 March 2008 (UTC)

Flowanda, I don't believe you understand the policy on primary sources. When getting base numbers, or base information the primary source is the preferred source to use - read the policy. It is in the different interpretations of the primary sources that a third party source is useful. If you are siting the population of a town do you site the census beauro or a book about the the census beauro report? You would only cite the book if you were talking about the "impact" of the information in the report. It is when you rely on "interpretations" to explain the orignal data is when you run the risk using inaccurate figures and information because you are getting the information second hand. This is no different.Cool10191 (talk) 14:36, 20 March 2008 (UTC)

Time value of money solutions are not "research", but the issue here is that I didn't make my point clearly: what I meant to convey is that in order to support claims made by Cool10191, such as the one above regarding effective cost of capital in a situation where one pays back a loan a year later, sources are needed. I don't think there's satisfactory evidence to even support the implied interest rates stated in this article; the only way to know them for sure is to find a reliable source for the cash flows and associated timings involved and compute the implied interest rate. I stand by my objection to adding blank citations all over this article, though of course I agree with the necessity of external sources. fsiler (talk) 09:46, 16 March 2008 (UTC)

Annual Percentage Rate Discussion

Hey guys here is a chase bank application: [1]. Interest rates are sited on the app. In the case of chase they use 11 days as the repayment date, that is theoretically the earliest the irs will deposit. (this is not the case in 5% of returns being proccesed by CADE) Also see the IRS refund cycle chart, [2]. The repayment date is variable between 10-21 days, some calculate it at 10 days because that reflects the highest possible number when the average repayment date would be more like 14 days (this does drop the apr number significantly). And, technically repayment at 10 days would be based on ACH Pre-notes, not actual funding, that might be noteworthy too - no online reference for that, but when money is ACHed, as anyone in banking knows, it does clear the fed for about 2 days, however you do receive pre-notes the same day, typically. This is the only bank application i can find online. I wish i could link the bank apps of Republic Bank and Trust and RCB Tax Division, their rates are based on 14 day repayment periods. I am not sure what SBBT bases theirs on. As far a fee on defaulting, I have checked that out; also stated in the chase application there is no static fee but a 16%+prime apr charged to balances outstanding after 90 days so in extreme cases the repayment APR could be based on 90 days, which would lower it to the point of less than 10% anually in some cases. SBBT and HSBC no longer charge any fee like that due to lawsuits. I will look for those court records, they were sued in california. RCB Tax Division and RBT refund solutions never charged defaulting fees. Also when you calculate the APRs be sure to note on the application (the same as the other banks) that they charge a standard fee for each product they process, including non-loan products like RACs or RADs, so using standing lending standards that fee should not be calculated into the APR imho. Expressed as apr, rates are still high, between 40% and 200% apr, but still lower than what is stated in calculations in this article. And fisler, thank you understand that adding and subtracting is not original research. :) I think it ok to calculate the APR at 10 days, but i think 14 days is better, and at the least it should be mentioned that repayment date is variable , the apr could fluctuate by about 35% depending on what day they file their taxes even though the fee paid is the same. My central point here is that the repayment date is variable, therefore the APR fee is not static and should be represented as such in the article. And secondly, in the case of defaulted loans no penalty is applied by chase until 90 days, so in that situation it is a 90 day loan, not 10, and the fee is still the same. While the other banks do not charge any fee at all. For these two reason I think it is entirely unfair to use APRs to describe the fees without in someway explaining the repayment process and repayment date being variable, etc. (the banks don't need to charge late fees or press for collections, the losses are expected and recovery is built into the fee structure.)

Let me put it this way, maybe will make it clearer: If a person does their taxes on Friday then the apr is say 100%, if they had did it the day before on thursday it would have been 60%, if the IRS has to double check their return (common) then there is another 7 day delay and apr is now 30%, if direct deposit is not honored (not uncommon) then there is another 10 day wait APR is 20%, if their eic is audited (about 20% are) then there is a 3 week delay - apr is now about 12%, if they falsified information and get to refund, (according to chase) they are not responsible for repayment for 90 days, now their apr is about 8%. You see, the APR fluctuates quite a bit, even though the fee they pay is th exact same dollar amount.

fsiler I do see your point about adding blank citations, but I did that so the reader would know that those statements are possible inaccurate since they are not sourced (and I am quite certain they are incorrect) See my posts below.

Cool10191 (talk) 17:14, 16 March 2008 (UTC)

Banking position

I removed the content of this section as it seems to only promote info and links that would not survive in main article without WP:RS and provides no real concrete ways for uninvolved editors to make changes. As discussed before, the talk page should be about improving the article, not discussing the subject or skirting WP:COI issues. Flowanda | Talk 01:39, 12 March 2008 (UTC)

I could see that that trying to show the rise of RAL prices being related the consolidation of the indsutry is oringal research. But it is reality. I will let that one go.  :) Cool10191 (talk) 17:22, 16 March 2008 (UTC)

innaccurate statement about fees

This is innaccurate: "RAL fees are generally calculated as 3% of the loan, while credit card advance fees vary from 2-5% of the amount advanced, making them clearly comparable." Only Chase Bank calculates the fees based on 3% of the loan. SBBT calculates on a variable precentage based on the refund amount between 1.07% and 2.5%. The other two banks in charge tiered fees based on the refund amount. tiered: http://www.rcbral.com/pricing.html, https://www.republicrefund.com/Products/Pricing.aspx. Chase and SBBT don't list their pricing but i can upload pdfs of their brochures. Not sure if that is against wiki rules though..

I don't see that this entry has been corrected yet. Please look at the links, they links directly to two of the 4 ral banks. Their fees are NOT based on 3% of the loan amount, in fact i varies from 1-5% of the loan amount. The statement is inaccurate.Cool10191 (talk) 17:25, 16 March 2008 (UTC)

Another incorrect thing is this: "In 2006, firms like Jackson Hewitt and H&R Block were making refund anticipation loans as early as October 15, 2006, aimed at providing money to individuals for Christmas. These were RALs and encouraged (but did not require) the individuals to return to file their taxes 4-5 months later with that tax company." These were NOT refund anticipation loans. a RAL cannot be calculated until a refund is established. How can a refund be calculated in october? These products where called holiday loans and wer enot much different than a short term un-secured loan. The idea was that the person would take the loan then come back in January and THEN get the refund aniticpation loan and use those proceeds to pay for the holiday loan. Cool10191 (talk) 18:58, 16 February 2008 (UTC)

I don't see that this has been corrected either. Here is a good story explaining the difference between a RAL and a pre-season loan.[3] The "paytub loan" that was taken in decemeber is not a RAL. But they do get a ral later in january or feburary to pay off their paystub loan. There are also lots of story about the banks stoping to offer the products. The real reason, which is not in any story i can find, is because they lost a fortune on them! Here is another good link that explains the difference too. [4] Cool10191 (talk) 17:31, 16 March 2008 (UTC)

I have added multiple citations to this article. Several things said are clearly opnion, others, if fact need to point to a source.Cool10191 (talk) 19:23, 16 February 2008 (UTC)

Sources not meeting WP:RS

Edits I made to this article removing primary and promotional/POV links and the info they were supporting were reverted. The sources do not meet WP:RS because they are a press release from a bank saying it was the first RAL retailer, a PDF of a lawsuit on a website that tracks back to a trademark attorney's blog site, a bunch of uploaded pages on Google about patents, and a 93-page research paper funded by a major tax service. These sources do not meet the requirements for third-party, independent sources, especially in an article that is as contested as this one is. It would make the article a lot stronger to find mainstream articles that quote these websites (and in the case of a 93-page book, distill the info so it's more easily understood by casual readers)...are there any articles we can use to support this info? Flowanda | Talk 05:09, 23 February 2008 (UTC)

I think this needs to go further:

From the article: "By the early 1990s the system became being exploited; filers would misreport their income to inflate their refund. As a result and also to discourage filers from this rather uneconomical offer, in 1994 the IRS stopped providing tax preparers a confirmation that a deposit would take place for a certain amount and that it would begin sending refunds directly to taxpayers instead of banks that made the loan.[4]"

This is kinda of a bad stopping point for the history of RALs. The confirmation of deposit (officially called an acknowledgment), was re-instated shortly after if was stopped. It had the oposite effect the IRS hoped, it instead caused RAL prices to increase significantly to cover the additional risk and caused the banks offering them to link the loan more directly to the customers credit report and less to the tax return. So then the customers where taking out loans, the IRS was not always honoring direct deposit so people would get a RAl and then their IRS check in the mail and end up owing a bank thousand of dollars because the IRS didn't send the funds to the bank.. This of course did not make the taxpayers happy and acknowledgments were re-instated the next year. And to be most specific, acknowledgments where never completed stopped, just a the debt indicator and confirmation of deposit portion of the acknowledgments. I am going to add just a bit of this to the article. —Preceding unsigned comment added by Cool10191 (talk • contribs) 15:04, 3 March 2008 (UTC)

CADE

I have also added a little bit on CADE. I think it is very relevant to this article. Once it is online there will be no need for refund anticipation loans and this article can be committed to history! CADE is a the new IRS processing system. Once online it will process tax returns within one day and be able to deposit money within 48-72 hours! So taxpayers can get their money back as in the same time as getting a RAL. I know I am baised on this artcile.. So I won't put anything controversialCool10191 (talk) 15:30, 3 March 2008 (UTC).

Sourcing, conflict of interest and encyclopedic content

I have removed a section of edits that constitute original research or discussion of the subject rather than the article. Running your own numbers and wishing you could link to your company's website are not helpful additions for other editors wanting to improve this article. None of the info added can be added to the article, so what are we supposed to do with it? And yes, adding and subtracting is original research when you draw conclusions from it. Let the media do that, and then we can quote them. Flowanda | Talk 02:21, 21 March 2008 (UTC)

Flowanda, you are mistaken. Stating numbers is not original research when they are based on sources. And i have given you two excellent sources: an actual application with actual fees and aprs, and another source from the IRS showing the schedule of payments. dates. There are several posts on your user talk page about your lack of credibility in editing financial and legal articles. Please refrain from deleting my comments. If you will read those sources they completely concur with what my comments on the variable repayment and APR dates, and if it not enough to support an edit - it is enough disprove the APRs as they were stated.. By your statement it is original research for me to use two population reports and subtract the difference to state the rise or fall in population. That is not original research. This is no different. And since when is the media all that reliable? You have to go back to the original source.. And I am not drawing a conclusion from the numbers, I trying make the number accurate.Cool10191 (talk) 02:30, 21 March 2008 (UTC)

I suggest you take a closer look at the sources of those comments on my talk page. And you're not just stating numbers; you are making calculations. And despite what you personally think of the media, they are the accepted sources for citations on Wikipedia, especially for controversial subjects, such as this one. Flowanda | Talk 03:20, 21 March 2008 (UTC)

Yes but media sources also have to have verified primary sources to be included as a legitimate source here. There are media stories that say the jews are evil - al jazera - is that a good source? but that is off subject. And listen to what you are saying, calcuations of NUMBERS are not original research when your base numbers are sourced. And Flowanda, how is deleting most of the article at all helping it? At least I am trying to improve it. And I have reviewed your history and I find that the majority of your edits are removals and arguing with references and sources. But you rarely seem to provide any sources of your own. It is easy to tear things apart, you would be better served trying to build up wikipedia. If you want to delete half of an article you need to discuss it on the talk page first. Other editors have put alot of time into building articles and I am sure do like to see one torn down by one who user without providing any sources to discredit their edits. If you have problems with facts you need to add citation needed tags and take it to the talk page PRIOR to a major deletion. If this was an article i had spent much time on I would be quite upset to have you delete most of it. You are jumping all around the the actual questions I pose and simply stating -CIO or WP:this and WP:that, please, lets try to improve the article with some dialog. And finally, i don't know why i need to say this again: I am not drawing conclusions, the APRs are stated clearly in that document and the repayment dates are stated clearly in the other - all you have to do is apply the APR applicable to the repayment date and see if it matches. Cool10191 (talk) 03:28, 21 March 2008 (UTC)

How do you want this info you're adding to the talk page used to improve the article? Flowanda | Talk 05:29, 21 March 2008 (UTC)

I think it should be used to put the correct APR information into the article. I think the thing to do, overall with the article would be to keep the history and controversy section as they are, adding some more information. But to also add a neutral section that just explains what the product is, how it works, the cost of doing it, and the benefits and the drawbacks. And keep any points that are critical of the product in the controversy section. And keep information on patenting and how it was developed in the history section. The controversy of the product should be included, but the primary point of the article should be to accurately explain what the product is. Cool10191 (talk) 12:04, 21 March 2008 (UTC)

Something like this:

A Refund Anticipation Loan (RAL) is a short term loan from a bank using an expected tax refund as collateral. The product is offered through professional tax preparation firms that offer E-File to their customers. When a consumer has there taxes prepared they can request the loan product in order to access funds 10-35 days quicker than if they there where to wait for the IRS to direct deposit or mail their tax refund. Consumers who receive RALs are usually charged an application or documentation fee by their tax preparation firm in addition to the the loan's service and financing fees. Fees are variable depending upon the bank financing the loan, most banks charge approximately $110 for a $2800 refund anticipation loan. ($2800 is the average refund amount, that would be a good number to use in the article [5]) Expressed as an APR the loan fee for a $2800 can between 120%-57% depending on the day of the week the the tax return is filed and length of time it takes the IRS to process the tax return. The loan requests can be denied based upon certain forms that may be filed as well as in a credit check for delinquent government obligations. In cases where the loans are not fully repaid by the tax refund within 90 days, consumers then become responsible for repayment.

The benefit of this product would be for customers who are in immediate need of funds. Since the product is a unsecured loan it can also boost credit scores after it's payoff. The product also allows consumers to have there taxes prepared with no up front fees, the client can optionally have them deducted from their tax refund.

There are several drawbacks to the product. One is that if the loan is declined the client in most cases will be unable to have their check mailed or direct deposited to their account, they will still have to receive their check through their tax preparation firm. Another drawback is that in some cases if the client owes a loan balance from a prior year RAL then their refund can be seized as a cross-collections repayment.

2008 Regulatory Developments and minor other changes

I removed a statement early in the article that a RAL loan has a 100% chance of being paid by IRS. Obviously the chance is not 100%, otherwise the fees would be much lower. In my experience approved RAL loans have about an 85% chance of being paid on time. I substituted the word significant instead of 100%.

Also, I added a good bit of information under the recent state regulation subhead that covers precisely why RALs are legal and why state actions against them always take the form of alleging overpromotion or fraudulent presentation of the product.

Further, I added some limited information regarding the "Advance Notice of Proposed Rulemaking" that was issued by the IRS in January 2008 which is a hint towards potential future regulation of RALs by the IRS.

Finally, in reading the article I still have concerns that the NPV flag might should come back. The article is considerably out of balance in terms of the quantity of information slanted against RALs and the quantity of information slanted for RALs. Consider this: if 10% of RALs are oversold then using the legacy numbers in the current article of 12 million RALs per year, there are over 10 million properly sold, happy, and very satisfied purchasers of RALs in the United States every year. Does that warrant an article with such a negative slant.

As always, to my own detriment, I have written almost completely from memory, with very little documentation.

72.254.22.168 (talk) 07:58, 5 June 2008 (UTC)

Would you mind finding and citing sources? ~~ N (t/c) 08:16, 5 June 2008 (UTC)

Removed statement

I have moved this statment here:

A 2006 study by the NCLC and the Consumer Federation of America found that "based on national averages, an EITC borrower could expect to pay $900 in fees for refund loan, electronic filing, check cashing and tax preparation fees to obtain a $2,150 refund."

This statement is very misleading and should be changed or removed. This is talking about the total cost of tax filing plus a refund anticipation loan. Refund anticipation loan fees do not exceed $150, and for a $2,150 the cost would be more like $100. A quick review or the pricing on RAL websites will show this. The person would have to pay the tax prepareration fees and filing fees even if they did not get a RAL and that accounts for 80% of the cost. If you read the report it is talking about it shows that the average ral fee charged in 2006 was $100.16 and that the average application fee charged by the preparer was $29.08. The way this statement read it sounds as if it is trying to say the entire $900, or at least the big chunk is for rals.[6] To insinuate that tax preparation and filing fees are related to the amount of the refund is very misleading, and to link preparation fees and filing fees to the refund amount is illegal. The fees are charged for services rendered, not financing. Charles Edward 13:40, 5 June 2008 (UTC)

I reverted your edits because the content was accurately sourced per WP:RS. Please review WP:COI, WP:CORP and WP:OR if you want to continue to push your corporate POV on this talk page and the RAL article mainspace. Flowanda | Talk 09:10, 6 June 2008 (UTC)

This information was cited from an article that was misrepresenting a fact stated in a primary source. Do you ever discuss substance, or do you only quote wiki guidlines? That statement is misleading at best and dishonest at worst. Read the actual document that is being cited in the reference and you will find that it is a twist of the facts.

Please Flowanda just read the report.[7] It states on page 7: III. Price of a RAL for 2005

Based upon the prices for RALs in 2006, a consumer can expect to pay about $100 in order to get a RAL for the average refund of about $2,150 from a commercial tax preparation chain this year. This loan fee includes the fee supposedly for the “dummy” bank account used to receive the consumer’s tax refund from IRS to repay the RAL. The effective APR on this RAL would be 178%.29 This does not sound like $900, the source used is misrepresenting this report.

If you cannot see this I suggest we get an admin to mediate. I believe you are biased and have a COI as is demonstrated by your anti-corporate crusade on wikipedia. And for the record, I do not work for a corporation or a RAL bank. I did several years ago. At least I admit that I have suggested things that are original research, I have never pushed a corporate POV on this article - And that you see shows your own bias. However I suspect, once shown the folly of your ways with facts, you will as normal only site wiki guidelines and impune the editor rather base your decision on the facts of the sources. I am going to change that statement again. If there is an edit war let the record show you started it. Charles Edward 11:10, 6 June 2008 (UTC)

Links on RALs

consumeraffairs.com, Paul of Cincinnati OH (01/28/07):
"Me and my family came here to file out taxes, like we have done for the last 15 years. This time the person servicing us stated that WE have a new bank product this year. Your ral in 1-2 days guaranteed! we have used there services for years and allways have gotten rapid refund in as little as 3-6 days. We trusted their product and tried it this year. on 1-26-07 the HR branch stated that we didn't qualify for RAL. This is a first in 15 years!!!! We were denied for internal bank reasons! They would give any contact numbers for the bank. And they also couldn't or wouldn't look into a refund of $346.76 in tax and bank fees. This has cost our family a lot of financial grief this time. This has never happened before and it wont happen again. These services that this company is offering is geared toward people with low income who cannot afford to pay the $100 upfront to get there taxes done and a refund in 10 days." [8]

National Taxpayer Advocate's 2007 Objectives Report to Congress, Volume II, The Role of the IRS in the Refund Anticipation Loan Industry:
"[pages 11-12] . . . At the very least, banks should be barred from transferring EITC under a cross-collection arrangement to satisfy a debt owed to a third party bank . . . " [9]

National Taxpayer Advocate 2005 Annual Report to Congress, Executive Summary, The Most Serious Problems Encountered by Taxpayers:
"8. Refund Anticipation Loans: Oversight of the Industry, Cross-Collection Techniques, and Payment Alternatives . . . The IRS contributes to the demand for Refund Anticipation Loans (RALs) by: (1) failing to deliver refunds in the quickest manner possible and (2) failing to provide RAL alternatives for the 'unbanked.' . . . " [10]

Illinois, Office of Attorney General Lisa Madigan:
" . . . In 2002, these customers paid an average of $248 in costs and fees to receive an RAL on expected tax refunds that averaged $1,980 . . . " [11]

Hood v. Santa Barbara Bank & Trust (2006), Cal.App.4th:
" . . . Santa Barbara denied Hood's loan application because a third party bank claimed that she owed it money for a preexisting RAL. After the IRS deposited Hood's 2001 refund into the Santa Barbara account, Santa Barbara paid it to the third party bank. . . . " http://fsnews.findlaw.com/cases/ca/caapp4th/slip/2006/b184489.html

consumer-action.org, Feb. 5, 2007:
“ . . . Thus, in 2007, a consumer can expect to pay from $57 to $104 to $111 in order to get a RAL for a typical refund of about $2,500. The effective APR for this RAL would be 85% to 150% to 170%. The RAL loan fee is in addition to tax preparation fees averaging $150 and, in some cases, an application fee of about $40. The major commercial chains have stopped charging this fee, but independent tax preparers may charge a fee and they have a substantial portion of the tax preparation market. . .” [12]

California Attorney General sues H&R Block, February 2006:
“ . . . H&R Block does not adequately tell such customers about any alleged debts, or that when they sign the new RAL application, they agree to automatic debt collection – including collection on alleged RAL-related debts from other tax preparers or banks. These applications are denied, and the customer’s anticipated refund is used to pay off the debt, plus a fee . . . " [13]

2nd Story Software, HSBC loan application, 2005:
"9. Payment of Other Debt . . . With respect to any delinquent debt I owe to JP Morgan Chase Bank, Bank One, First Security Bank, Republic Bank, Santa Barbara Bank & Trust, First Bank of Delaware, or County Bank and/or their assigns (the "Other RAL Lenders"), relating to a RAL or similar financial product made in prior years . . . " [14]

Bank One, RAL application, 2006:
" . . . COLLECTION OF OUTSTANDING RAL DEBT—If you owe money for a RAL from any prior year to Bank One or another RAL lender, including HSBC Bank USA, N.A., Beneficial National Bank, Household Bank, f.s.b., Santa Barbara Bank and Trust, County Bank, First Bank of Delaware, First Republic Bank, First Security Bank, Republic Bank & Trust Co., Republic First Bank, Imperial Capital Bank, or any of their successors or assigns, you acknowledge such prior obligations and authorize Bank One to deduct . . . "
This cross-collection provision is from the second page of the four-page loan application, which is included in the industry publication "Your Key to Our Program, Bank One Tax Related Products, 2006."
page 44 (49 in PDF file) http://www.petzent.com/crosslink/formsdocs/2006KeyBook.pdf <-- broken link

Bank One, non-loan bank products ("RACs") can also be cross-collected from, 2006:
" . . . This provision applies to any Bonu$ Deposit Account, whether or not you apply for a RAL. If you have an outstanding RAL, you understand that Bank One will be acting as a debt collector . . . "
page 44 (49 in PDF file) http://www.petzent.com/crosslink/formsdocs/2006KeyBook.pdf <-- broken link

Bank One, binding arbitration, 2006:
" . . . ARBITRATION REPLACES THE RIGHT TO GO TO COURT. YOU WILL NOT BE ABLE TO BRING A CLASS ACTION OR OTHER REPRESENTATIVE ACTION . . . "
page 44 (49 in PDF file) http://www.petzent.com/crosslink/formsdocs/2006KeyBook.pdf <-- broken link

IRS time frame for e-file:
". . . in as little as 10 days with Direct Deposit."--from page 5, 1040 Instructions, 2008.
http://www.irs.gov/pub/irs-pdf/i1040.pdf

essay by filmmaker Danny Schechter:
" . . . I saw this first hand when making my film In Debt We Trust. We were shooting in Brooklyn's black community outside a small H&R Block tax prep store advertising 'instant money' in the form of tax rebate loans. I was with Sarah Ludwig, an organizer with NEDAP, an economic justice organization who explained:
'The interest rate is anywhere between 40 and 700 percent, annual percentage rate. Because these are very short term loans, that are being made by some of the largest banks in the world, which netted $1.6 billion in profits.'
That surprised me. What banks? All I could see was a grubby little ghetto store.
Her response: 'You don't see the banks. And what you really should see behind this storefront looming are some of the largest financial institutions in the world. Particularly HSBC' . . "
Danny Schechter, who directed the documentary In Debt We Trust (2006), recounted this conversation in his essay "Media, Big Business And the Economic Squeeze." [15]

Financial Aid Podcast, Aug. 11, 2008:
"+ A cautionary note about using tax filing services - avoid at all costs the “refund anticipation loans” such as Rapid Refund, etc. - there’s some whammies in there that can eat your entire refund. For example, if you don’t qualify for the loan, you get a bank account product instead and still pay high fees. Also, some of these companies also do debt collection enforcement, so if you have an outstanding debt that is registered with one of these companies, they can legally seize your refund. It’s buried in the contract you sign when you agree to the refund anticipation loan."[16]

Florida, Office of Attorney General Bill McCollum, Jan. 31, '08:
" . . . Consumers are also cautioned about taking out 'Refund Anticipation Loans,' as the fees will still be required even if the loan is not approved . . . " [17] —Preceding unsigned comment added by FriendlyRiverOtter (talk • contribs) 21:06, 22 July 2009 (UTC)

What do you propose be added to the article using these sources? —Charles Edward ^{(Talk | Contribs)} 21:35, 22 July 2009 (UTC)

We definitely should include "cross-collection," which I don't think our article mentions even one time (although HSBC now seems to be calling it "previous debt" or "outstanding debt"). To the best of my knowledge, HSBC and Santa Barbara Bank & Trust are the only two banks currently doing RALs in the United States.

And we probably should include the Taxpayer Advocate's 2007 The Role of the IRS in the Refund Anticipation Loan Industry as a reference or external link. FriendlyRiverOtter (talk) 00:37, 24 July 2009 (UTC)

Alot of this could be very useful in the article, and you are more than welcome to edit it :) I would be cautious however in using blanket statements about RALs though because the terms, fees, cross collection, etc, varies between the banks significantly. Some banks cross-collect, others do not. Some banks charged tiered fees, other have percentage models. Some calculate the apr at 10 days, others at 90 days. Some charge late fees on delinquent balances, others do not. It would definatly be best to specify individual banks in each situation. The problem with this article is that the overwhelming majority of sources focus on the negative aspects of the product, and there are few or none who give full details on the products and contrast the different banks, the different kinds of RALs, or the trends in the tax bank product industry itself, which makes expanding this article in a neutral and comprehensive way with no original research is very difficult. The is also little or no published information explaining the relationship between tax firms and the banks that finance the products. Additionally, and most importantly in my opinion, there are absolutely no published third party sources anyway that deal with the fact RALs are high risk, high loss, rife with fraudulant applicants, etc, and the reasons for that. There is a little bit lately on the major fraud attacks on the banks but you really have to dig. [18]. SBBT didn't turn a profit on RALs last year, and Chase had a major case of fraud. There are a dozen or so other cases just last year. There is also nothing about the role of the FDIC and OCC in the products. For example, RBBT earlier this year was forced by the FDIC to implement an extensive auditing program that fed a 8% jump in their fees and a significant drop in their profit margin. [19]. My problem with this articlse as it currently is, was and remains the mischaracterization of the fees, and it does not clearly explain that a person charged X dollars by the tax preparer, Y dollars is a preperation fee, and Z dollars is a service fee that they would be charged if they are going to be charged even if the IRS send them their refund. It also nowhere breaks down the actual finance cost, and treats the entire product fee as financing - which not how FDIC regulation treats the fee structures. The article, and admittedly the biased sources used within the article, exagerate the APR rates by adding in fees that not charged by the financing bank, or that are charged by the bank but are not related to financing, like the account setup fees they are charged to have their tax preparers fees withheld (which they would be charged whether or not they were getting alone), and by always using the earliest date possible for repayment rather than the average date of repayment (compare apr on a 10 day loan to apr on a 18 day loan and you nearly cut the rate in half). And then there is no explanation within the article at all about non-loan tax bank products and how that relates to RALs. Basically, in short, except for primary sources like the ones you are showing here, there is nothing published anywhere on these topics. Unfortunatly, most primary sources cannot be used for much of anything because of WP:PRIMARY. Also, again you will be hard pressed to find sources online for this, but HSBC hasn't been financing bank products for two years, since they terminated their contract with H&R block. Chase is the only major bank that finances RALs, SBBT and RBBT are medium sized regional banks, and all the other banks are even smaller. And also, in regards to the profits made on the products, we really need a source that shows a break down of the gross profit - which is what most of the biased articles use - and the net profit, and it needs to be broke down seperating the RALs from the non-loan products, which is another trick the biased article use to exagerate the profits made on the products. —Charles Edward ^{(Talk | Contribs)} 03:18, 27 August 2009 (UTC)

Charles, I think we're miles apart. Yes, I agree, a variety of specific examples. But other than that, I don't think we have too much agreement.

On cross-collection, it would surprise me if any banks were not participating because it's profitable and it's relatively invisible. I would need to see specific good sources. On fraud, before the bank even considers the loan, the return is first accepted by the IRS, meaning names and social security numbers match, and other matches. And there has been talk of the IRS using child support records (I do not know if this has started). Some of the issues are complications introduced by the tax code. For example, divorced parents can alternate years as far as claiming a child for a dependent, but not for Earned Income Credit. There used to be a phrase for Earned Income Credit, care for as your own, something very very similar to that, maybe that exact phrase. And you see how it's a memorable phrase. Well, that's now old school. It's now very specific rules. So a lot of what might be called fraud might instead be confusion about the tax code or genuine custody disputes. In addition, the IRS furnishes the banks with the DI (Debt Indicator, which tells the bank whether or not the taxpayer owes money to the federal government). In fact, the IRS has been criticized for assisting the RAL industry in this regard. Only after all this, does the bank send an electronic check authorization to the particular H&R Block storefront (or rather make a business decision whether or not to extend the loan; many customers are denied the loans).

H&R Block issued HSBC checks in 2009. I have been an employee, and I have tried to meaningfully disclose the main features of the RAL application to our clients, which isn't easy. Cross-collection, in particular, is a bolt from the blue. It would be as if a person set up a plain vanilla checking account at any mainstream bank, and then the person finds out that the bank has taken all of his or her money out of the account because of debt he or she owes to someone else, and that one of the pages in the raft of papers they were asked to sign gave the bank this permission. (And this practice would never stand if it was done to middle-class people. The fact that it is done to low-income people is viewed as somehow making it okay, or perhaps it’s just flying lower under the radar.)

I don't know what these sources are that are saying that HSBC terminated their contract with Block two years ago. I can only think that Block did prefile loans in '07 but not in '08 and maybe that contract got terminated in '07. Block restarted prefile in '09, but on a more limited basis, and with HSBC.

I'm going to use my background information and also find the best sources I can. And I think that's a fine way to go about it. I am currently wading my way through the settlement for Hood vs. Santa Barbara Bank & Trust. FriendlyRiverOtter (talk) 21:17, 27 August 2009 (UTC)

On cross-collection, it would surprise me if any banks were not participating because it's profitable and it's relatively invisible. I would need to see specific good sources. RBBT, SBBT, Chase, and H&R block are the only banks which cross collect. I have access to applications from each of the six RAL providing banks and can give you individual quotes from them if you like. The other two banks do not cross collect. And as I said above, you will not find an online source for this because most published sources on RALs are inherently baised.

On fraud, before the bank even considers the loan, the return is first accepted by the IRS, meaning names and social security numbers match, and other matches. And there has been talk of the IRS using child support records (I do not know if this has started). Yes this has been started using a the F debt code in IRS ACKs. Some of the issues are complications introduced by the tax code. For example, divorced parents can alternate years as far as claiming a child for a dependent, but not for Earned Income Credit. There used to be a phrase for Earned Income Credit, care for as your own, something very very similar to that, maybe that exact phrase. And you see how it's a memorable phrase. Well, that's now old school. It's now very specific rules. So a lot of what might be called fraud might instead be confusion about the tax code or genuine custody disputes. In addition, the IRS furnishes the banks with the DI (Debt Indicator, which tells the bank whether or not the taxpayer owes money to the federal government). In fact, the IRS has been criticized for assisting the RAL industry in this regard. Only after all this, does the bank send an electronic check authorization to the particular H&R Block storefront (or rather make a business decision whether or not to extend the loan; many customers are denied the loans). I understand this and you are correct to the extent that this does help with fraud considerably, but to pretend that it reduces loans to the point where they are no longer risky is folly. The IRS does not process the entire tax return until days after the acknowldgement information is sent, and that is when fraud is caught in EIC. The banks loan on the amount initially sent to the IRS in the return to the IRS. The IRS will accept the return and return an accept with debt codes - as you say - but they do not return what the refund amount will actually be. It is common among low income taxpayers to trade dependants (illegal) and do other things to cheat on their taxes and EIC to increase their refund amount which is caught in IRS processing and causes their refund to be less than expected - and less than what was loaned to the customer, resulting in losses to the bank. That is your run of the mill fraud which is still very possible and common despite the safegaurds put in place. But again, you are not going to find online sources for this because no one cares to research it. The larger fraud which I was refering to was the identify theft rings which i linked to an example article on a single man who cheat a bank out of three million dollars on the loans. There were a least a dozen similar cases last year to my knowledge.

H&R Block issued HSBC checks in 2009. H&R block issued their check stock yes, because their accounts are with them, but HSBC did not provide the financing. H&R block has opened their own financing division. I have been an employee, and I have tried to meaningfully disclose the main features of the RAL application to our clients, which isn't easy. Cross-collection, in particular, is a bolt from the blue. It would be as if a person set up a plain vanilla checking account at any mainstream bank, and then the person finds out that the bank has taken all of his or her money out of the account because of debt he or she owes to someone else, and that one of the pages in the raft of papers they were asked to sign gave the bank this permission. This is actually done on ALL bank accounts and ALL banks, and there is no disclosure at all about it. If you owe a bank a delinquent debt, and you have funds in another account in their bank they can and will seize the money to pay your debt. There is actually an FDIC regulation that requires this. The cross-collections for other banks is where things get more tricky, and that is why two of the six RAL banks don't do it, it is response to class action lawsuits. If you read the lawsuit closly, like the one Hood v. SBBT, you will see that the cross collection in and of itself is not illegal or uncommon. The thrust of the suit is that Hood was not properly notified that it could happen. (And this practice would never stand if it was done to middle-class people. The fact that it is done to low-income people is viewed as somehow making it okay, or perhaps it’s just flying lower under the radar.) It is done on middle class people accounts, many banks have cross collection agreements with other banks, it is just very uncommon for them actually cross collect because the odds of you happening to have money in an account in X bank that has an agreement with Y bank where to owe money is unlikely. This is most common in the larger banks that have numerous subsidiary banks. With RAL banks, there are only six banks, it makes it much easier to effect cross collections.

I don't know what these sources are that are saying that HSBC terminated their contract with Block two years ago. I can only think that Block did prefile loans in '07 but not in '08 and maybe that contract got terminated in '07. Block restarted prefile in '09, but on a more limited basis, and with HSBC. Again, HSBC is not financing these products, they are only providing the bank accounts and the check stock. H&R Block is financing the product through a new division of their own company. They are then selling the bundling the RALs and sell them on the bond market.

I'm going to use my background information and also find the best sources I can. And I think that's a fine way to go about it. I am currently wading my way through the settlement for Hood vs. Santa Barbara Bank & Trust. I think it is good to expand this article as much as possible using good sources. :) I just hope to point out that the majority of sources are either primary or baised and should be treated with caution. Here is aanother good online source you might want to check out. [http://www.cerca.org/CERCAfinalANPRM4-4-08.pdf —Charles Edward ^{(Talk | Contribs)} 02:33, 28 August 2009 (UTC)

Do you think there might be a reasonable way to post RAL applications? FriendlyRiverOtter (talk) 17:03, 2 September 2009 (UTC)

Charles, I think the answer's probably going to be that you're a good guy, I'm a good guy, but I'm just not going to be able to believe something so different from my personal experience. FriendlyRiverOtter (talk) 16:41, 8 September 2009 (UTC)

(Outdent) :) You are right, and I certainly appreciate your dialogue. The applications are not public domain, and in now way could they be uploaded under any fair use rationale that I can think of. So as far as putting them on wikipedia, I don't think that is anything that could be done. I could email them to you directly though. Is your email enabled in your preferences? Heres some more links you might also find useful in improving the article:

• [20] Some facts on SBBT rals <-- [having trouble pulling this one up. FriendlyRiverOtter (talk) 01:19, 28 September 2009 (UTC)]
• [21] SBBT had a net operating loss of $91 million on RALs last year

—Charles Edward ^{(Talk | Contribs)} 17:49, 8 September 2009 (UTC)

Thank you for your gracious offer. But I'm not sure I could do anything with it. I already have my personal experience (three years at H&R Block, one year somewhere else) in which I have to be rather guarded about. I feel I can talk about it to some medium extent here, on a discussion page, but anything I add to the article itself has to be backed up with references to the financial press (or the consumer press, or the mainstream press, or the indy press, or something; something that in our own best judgment provides a good reference). And then, there's the very practical matter that I'm an on-again, off-again user of wikipedia. I don't want to set up an email address the main effect of which is that I'm going to be unable to respond to mail. FriendlyRiverOtter (talk) 18:29, 15 September 2009 (UTC)

According to this 9/13/09 article, HSBC got out of all its RAL contracts except for H&R Block. (The info is under the 'Hard Decisions' section). I didn't add it to the main article. Flowanda | Talk 21:35, 15 September 2009 (UTC)

---

The following might be a little bit like what we're looking for:

“Get Money Quickly and Conveniently”
http://www.hrblock.com/taxes/products/office/fast_money_options.html
“ . . . If approved, you could receive a loan up to the amount of your anticipated tax refund (minus bank and H&R Block fees). . . . ”

Okay, that's not terrible. They are telling people it's a loan and that it's subject to approval. But people are still going to think, well, my refund is fine, my tax return is fine, you guys did it, right, so what's the problem? The problem is, or the answer is, that the loan is only partially based on the collateral of the tax refund. It's also a credit decision on the part of the bank, who are very guarded about the reasons for their decision. In previous years, the only thing the bank would tell customers would be "internal bank reasons." Wow. FriendlyRiverOtter (talk) 01:37, 28 September 2009 (UTC)

additional links

NATIONAL TAXPAYER ADVOCATE: 2005 ANNUAL REPORT TO CONGRESS, VOLUME 1, 31 December 2005, page 166 (174 in PDF file):
"Delays in Refund Delivery
"Currently, if a taxpayer does not purchase a bank product, the quickest way to receive a tax refund is to file electronically and request a direct deposit into a bank account. As discussed above, the refund turnaround time for this method is as few as 10 days. In fact, with the implementation of the Customer Account Data Engine (CADE), the IRS can turn around a refund within two to three days, but pursuant to its Revenue Protection Strategy (RPS), the IRS first runs the refunds through Criminal Investigation screens and the Dependent Database, increasing the turnaround time to five days. For taxpayers who purchase bank products due to the speed of the refund turnaround time, shortening the time to three days might make a world of difference, especially if the taxpayers are sufficiently informed about their options and the cost of alternatives. Given that the RPS delays the delivery of refunds, competing tax administration concerns contribute to the demand for RALs. It is incumbent on the IRS, then, to review the timeframes for RPS screening and shorten them as much as possible."

It certainly seems like it would be part of good, solid journalism to show some of the language of these stardard forms. It would be awkward for an employee to do this, as he or she would be whistle blowing to some extent. But these are the standard forms, sure seems like they should be public information. FriendlyRiverOtter (talk) 18:55, 23 February 2012 (UTC) FriendlyRiverOtter (talk) 18:04, 1 September 2012 (UTC)

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Your Key to Our Program, 2010 Program Handbook for the Chase Tax Related Products programs, page 42:

“COLLECTION OF OUTSTANDING RAL DEBT – If you owe money for a RAL from any prior year to Chase (including Bank One), you acknowledge such prior obligations and authorize Chase to deduct the amount of the outstanding RAL obligation(s) from your Bonu$ Deposit Account and apply such funds to your outstanding RAL obligation(s) with Chase. This provision applies to any Bonu$ Deposit Account, whether or not you apply for a RAL. If you have an outstanding RAL, you understand that Chase will be acting as a debt collector under the terms of this Application/Agreement and that any information obtained will be used for that purpose. . . ”

Maybe banks are starting to move away from cross-collection. Maybe. Please notice, Chase is not saying that won't collect for other banks. They are merely saying they will collect for themselves. (And "cross-collection," now more commonly and vaguely called "previous debt" by tax prep companies and their partner banks, has been such an ingrained practice, and such an industry standard across banks, I would still have my doubts.)

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http://www.aarp.org/content/dam/aarp/aarp_foundation/litigation/amicus_brief_pdfs/Harper_Jackson%20Hewitt.pdf
Amici Curiae Brief in West Virginia, Dec. 23, 2009.

What is Cross-Collection?

The following is from Hood vs. Santa Barbara Bank & Trust http://fsnews.findlaw.com/cases/ca/caapp4th/slip/2006/b184489.html "On January 31, 2002, Hood went to a Jackson Hewitt office for tax preparation service. A Jackson Hewitt employee told Hood that she had two options for a quick refund--a "rapid refund" that she could receive the next day, or another refund that would be payable within 48 hours. The Jackson Hewitt employee did not explain that these options were loans. . . . Santa Barbara sent Hood a letter dated February 3, 2002, stating that her RAL was denied because Santa Barbara had "been informed of an outstanding [RAL] debt with [Household Bank]." Santa Barbara's letter stated that Hood's 2001 tax refund would be used to satisfy the Household Bank RAL debt and that Santa Barbara would send Hood any funds remaining after the Household Bank RAL debt was satisfied. Hood did not receive her 2001 tax refund. Nor did she receive the Accelerated Check Refund described in the RAL application as an alternative product for applicants who were ineligible for RAL's." FriendlyRiverOtter (talk) 00:45, 17 December 2009 (UTC)

Cross collection is when you owe an entity a debt, and it is collected on behalf of that entity by another entity. —Charles Edward ^{(Talk | Contribs)} 15:34, 1 February 2010 (UTC)

Okay, next question, when a person walks into H&R Block or Jackson Hewitt to apply for the "Rapid Refund" or the "Money Now," or whatever it is they'll be calling it next year (including taking the tax prep out of the refund, which also involves a bank product and also involves this risk), is the client informed of all this in a meaningful way? FriendlyRiverOtter (talk) 17:14, 29 July 2010 (UTC)

Industry developments

I don't have the time, and not sure how much sourcing would be available, but there have been major developments in the last four monthes. One of the Major RAL banks was forced out of business by the OCC due to sub-prime mortgage problems. There was not enough funding during this season so significant percentage of firms, including many large franchises, where unable to offer the loans this year. FDIC is proposing a plan to bank state chartered banks from originating the loans in the future. There has been a major downward shift in pricing over the last year as well. There is also no information on the OTS and FDIC findings at Republic Bank. There are probably only primary sources available on any of this. —Charles Edward ^{(Talk | Contribs)} 15:31, 1 February 2010 (UTC)

BTW, I still feel that the lack good sources, heavy reliance on hostile consumer groups for sourcing, and the failure to show the benefits of this product result in a very POV article in its current state. —Charles Edward ^{(Talk | Contribs)} 15:41, 1 February 2010 (UTC)

Heres a story on SBBT. [22]. —Charles Edward ^{(Talk | Contribs)} 16:22, 4 February 2010 (UTC)

Dubious

From History:

RALs began with the IRS's introduction of electronic filing in the mid 1980s as a way to decrease its cost of operation.

This is highly unlikely. The revenue from RALs goes to the financial institutions, not the IRS. The cost of operating e-file would have been incident on the IRS. Am I missing something? Pnm (talk) 01:11, 30 May 2010 (UTC)

I think this is more a question of interpretation than factual dubiousness. I believe the intent is to convey that the introduction of electronic filing facilitated efficient collection of the information necessary to offer RALs. The bit about cost reduction being the reason for introducing electronic filing is extraneous. Tubamaster (talk) 23:37, 24 July 2014 (UTC)

Aug. 2010: IRS To Stop Providing Third-Parties with DI (Debt Indicator)

IRS to end release of taxpayer debt information, Associated Press, EILEEN AJ CONNELLY, Friday, August 6, 2010.

“The indicators served as a warning that some or all of a person's refund might be held to cover old debt, including back taxes, unpaid child support or delinquent federal student loans.

“They are typically used by the banks that fund refund anticipation loans to decide whether to loan taxpayers money backed by their expected refunds.”

---

And the IRS news release itself:

IRS Removes Debt Indicator for 2011 Tax Filing Season, IR-2010-89, Aug. 5, 2010.
'WASHINGTON — The Internal Revenue Service today announced that starting with next year’s tax filing season it will no longer provide tax preparers and associated financial institutions with the “debt indicator,” which is used to facilitate refund anticipation loans (RALs). . .

' . . . The IRS announcement would remove the debt indicator starting with the upcoming 2011 tax filing season. The IRS noted that taxpayers will continue to have access to information about their tax refunds and any offsets through the “Where’s My Refund?” service on IRS.gov. . . '

And perhaps the next part for us to add--> This same IRS news release, at the bottom, also says they are considering for the season after that (Jan. 2012), letting filers split off part of the refund to pay for tax prep, and the IRS is looking for input from taxpayers, consumer advocates, and tax prep professionals. FriendlyRiverOtter (talk) 21:27, 10 August 2010 (UTC)

---

IRS Removes 'Debt Indicator' for 2011 Tax Filing Season,
By James Limbach,ConsumerAffairs.Com,
August 10, 2010.

‘Starting with next year's tax filing season, the Internal Revenue Service (IRS) will no longer provide tax preparers and associated financial institutions with the "debt indicator," which is used to facilitate refund anticipation loans (RALs).

'The "debt indicator" acts as a form of credit check, telling tax preparers whether a taxpayer's refund will be paid or will be intercepted for government debts. . .

‘ . . . The NCLC and CFA have been urging the IRS to end the debt indicator since 2005, when they published a report entitled "Corporate Welfare for the RAL Industry: The Debt Indicator, IRS Subsidy, And Tax Fraud." . . ’

Another 2011 IRS change source

I was getting ready to add the same info that FRO has already added...great furry brains think alike. The AP article is much better, but articles are sometimes removed after a certain period of time, so here's another source of similar info in case the other link goes dead: http://www.americanbanker.com/bulletins/-1023886-1.html. Flowanda | Talk 22:29, 11 August 2010 (UTC)

Thank you very much Flowanda for the kind compliment. And thank you for all the good work that you do! FriendlyRiverOtter (talk) 21:22, 13 August 2010 (UTC)

Improving section on "cross-collection" (more vaguely called "previous debt")

In a 2006, the office of the Attorney General for the state of California described this as a “deceptive debt collection scheme.”

[http://oag.ca.gov/news/press_release?id=1261 Attorney General Lockyer Files Lawsuit Against H&R Block for Illegally Marketing and Selling High-Cost Loans as �Instant' Tax Refunds], State of California Department of Justice, Office of the Attorney General, Press Release, Feb. 15, 2006.

In 2006, the IRS Taxpayer Advocate stated that “At the very least, banks should be barred from transferring EITC under a cross-collection arrangement to satisfy a debt owed to a third party bank.”

National Taxpayer Advocate's 2007 Objectives Report to Congress, Volume II, The Role of the IRS in the Refund Anticipation Loan Industry, June 30, 2006, see section on “Debt Collection Offset Practice,” pages 10-12.

---

Instead, clients are often not even informed of this practice (and also IRS Taxpayer Advocate as above).

SETTLEMENT AGREEMENT

Hood, et al. v. Santa Barbara Bank & Trust, et al.

Santa Barbara County Superior Court, Case No. 1156354

(page 5)
“A. Business Practices to Be Followed
“1. Defendant Santa Barbara and Cross-Defendants agree not to engage in Cross-Collection during the 2009 calendar year . . .
“2. For future years in which Cross-Collection may occur, Defendants agree to provide a notice to Jackson Hewitt customers regarding collection of taxpayer refunds to pay RAL debts from prior years. . . ”

(page 6)
“B. Monetary Relief
“Defendant Santa Barbara’s records show that there are over 100,000 members of the Class. Defendants and Cross-Defendants will pay a total of $8,500,000 pursuant to the Allocation Agreement amongst Defendants and Cross-Defendants. . .
“2. . . . each Class Member will receive a minimum of 5.5% of the total amount of his or her tax refund that was collected by Santa Barbara and paid to a Third-Party Creditor. . . ”

http://www.nclc.org/images/pdf/litigation/closed/hood-settlement-agreement.pdf

@@@@

“The Sturdevant Law Firm and the National Consumer Law Center in Boston represented Canieva Hood, Tyree Bowman, and a proposed class of individuals who have had their tax refunds seized to pay back alleged debts to other banks. . .

“ . . . On April 29, 2009, the Court approved a final settlement that secured 8.5 million in compensation to individuals whose RALS were seized as well as comprehensive injunctive relief that ceased SBBT’s practice of cross-collection for a limited time and ensured consumers are provided adequate notice of the potential of cross-collection.”

http://www.sturdevantlaw.com/cases-hood.html

I want to continue to work on this, maybe adding some more, in part making this section more readable. FriendlyRiverOtter (talk) 23:14, 5 February 2012 (UTC) FriendlyRiverOtter (talk) 20:32, 6 February 2012 (UTC)

news items from Jan., Feb., March 2013: No more RALs, but RACs, plus hodge podge of other products

Refund Anticipation Loans Come With Risks, Better Business Bureau, 2/26/2013. “ . . . The Federal Deposit Insurance Corporation has forced all major national banks to discontinue these types of loans. Be wary of sketchy lenders, both online and off.”

Tax refund offers include extra fees, KGET [California], Feb. 7, 2013. ‘ . . . "It's still the same animal, it's just packaged differently. Before people weren't aware that it was a loan, so they did do away with that. They had to restructure how they were selling it to the consumer because there is interest, there are fees associated with it that people need to be aware of," said Hudson. . . ’

Action Line: Tax-time 'refund anticipation loans' to no longer be widespread, Tulsa World [Oklahoma], By PHIL MULKINS World Action Line Editor, Jan. 20, 2013. ' . . . "Even with the end of RALs, low-income taxpayers still remain vulnerable to profiteering," says the center's report. "Tax preparers and banks continue offering a related product - 'refund anticipation checks' (RACs) - which are subject to significant add-on fees and represent high-cost loans of the tax preparation fees. Tax preparation fees can often be opaque and expensive, with taxpayers unable to obtain estimates of fees to comparison shop. [Center for Responsible Lending] . . "

http://www.responsiblelending.org/other-consumer-loans/refund-anticipation-loans/tools-resources/rals-news.html

http://money.cnn.com/2013/03/06/pf/taxes/tax-refund-loans/ <-- And this last one looks like a hodge-podge of financial products taking the place of the traditional RAL. FriendlyRiverOtter (talk) 18:22, 8 March 2013 (UTC)

New tax refund loans carry sky-high fees and rates, CNNMoney, Blake Ellis, March 6, 2013:

" . . . Jackson Hewitt is offering tax-time credit lines ranging from $200 to $1,000, which come with a 35% interest rate, a $6.25 monthly fee and a fee of 3% or $10 every time the credit line is accessed, according to its website. . . "

" . . . AIT Financial Group, for example, launched a product this year that pays $600 to someone expecting a refund of $700 to $725 and will pay $1,250 for a $1,500 to $1,600 refund. . . "

" . . . The NCLC [National Consumer Law Center] also found that some shady tax preparers are even offering tax refund loans to lure taxpayers into their offices, but have no intention of lending them the money. . . "

I personally am a witness that this information has been falsified and

I having been the patent owner of the software at question here, and having been approached on February eighth of the year nineteen hundred eighty eight, by a representative who acted on behalf of the Internal Revenue Service, a person who is named Melody Moody Press, who asked for my permission to use my patented software for their own use for the electronic processing of tax refunds, they offered me patent protection and three dollars for every tax refund that was processed using my patented software. I opened up my 401k for the royalties and the account was soley in my maiden name. I have paperwork to prove this fact. The permission for tax accountants and the banks who would be processing the loans were the named few entities who would be given my permission to know the information surrounding my authorship of this and many other softwares as the information pertaining to me was top secret government contracts and considered governmental secrets of various trades. One of the bank who had been listed and specified on the documents to be processing the software was HSBC bank but they are not and were never the patent owner or author this was already a valid patent one of many in my portfolio that was already valid on February eighth of the year nineteen hundred eighty eight, at the time if my contract signing pertaining to my patented software and these various entities being able to use my patents with my permission. 2600:387:F:5734:0:0:0:3 (talk) 22:29, 8 December 2021 (UTC)