 These products are billed as a faster way to receive a refund around
tax time, but they're anything but that. They're simply a way to
siphon excessive fees from what taxpayers are actually owed per
their annual tax filings."The only thing taxpayers should
anticipate with these so-called refund products are costly fees and
smaller tax returns," Madigan said. "This legislation will limit a
refund anticipation loan's excessive costs and better protect
consumers in communities where these products are heavily marketed."
Senate Bill 3523 would crack down on the costs and fees of tax
refund anticipation products -- called refund anticipation loans and
refund anticipation checks. It would also strengthen disclosure of
fees and other costs and provide for additional protections for
consumers who obtain refund anticipation loans from non-bank
lenders, including payday lenders.
Refund anticipation loans have interest rates that run as high as
150 percent and can reduce a taxpayer's refund by as much as 20
percent before they receive it. Refund anticipation checks often are
offered to taxpayers who do not qualify for a loan and simply allow
the taxpayer to cash a refund -- using a check or a pre-loaded debit
card -- after the Internal Revenue Service deposits it in a
temporary bank account. These products are similarly riddled with
high costs.
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"Every year during tax season some tax preparers and lenders take
advantage of low-income individuals by charging them exorbitant
fees, on top of high interest rates, to get their refunds early,"
said Sen. Jacqueline Collins, Senate bill sponsor. "This legislation
will cap interest rates, prohibit fees charged in addition to
interest and give borrowers a chance to use their tax refunds as
intended -- to pay for needs like food, housing, clothing and
medicine.
"Last year we passed an increase in the state Earned Income Tax
Credit and put money back in the pockets of the working poor. I want
those eligible for the EITC to be able to keep and spend the full
amount of their refunds in our communities, not have to give it to
exploitative payday lenders or tax preparers."
Madigan urged consumers to be aware of the high cost of refund
anticipation products this tax season. She particularly urged
Illinoisans eligible for the Earned Income Tax Credit, a federal and
state anti-poverty program for working families, to ensure they
maximize their returns.
Rep. Michael Zalewski will sponsor the measure in the House.
[Text from file received from the office
of
Illinois Attorney General Lisa
Madigan] |
