Tax Refund Anticipation
About Tax Refund Anticipation
Refund anticipation loans, or RALs, were short term loans secured by a taxpayers expected refund. RALs were widely marketed by tax preparation companies like H&R Block and Jackson Hewitt. The loans carried extremely high effective interest rates, sometimes exceeding 100 percent APR. The IRS stopped providing a debt indicator to banks in 2010, making it harder for banks to assess risk. Major banks exited the RAL market. Refund anticipation checks, or RACs, replaced RALs as a safer but still costly product. Consumer advocates have criticized these products as predatory, targeting low income taxpayers. The IRS has been urged to provide free tax filing and faster refunds to eliminate the need for these products. The IRS Free File program offers free filing but has been underutilized.
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