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NEWARK - Division
of Consumer Affairs investigators have cited
38 businesses statewide for false advertising
in offering “same day” tax refunds,
following inspections last month of more than
600 businesses offering tax preparation services.
The cited businesses advertised
“instant,” “same day,”
or day-specific (“1 Day”, “2
Day”) refunds when the Internal Revenue
Service (I.R.S.) cannot provide tax refunds
on such a timeline. The I.R.S. states on its
web site that it takes at least eight days
to directly deposit a refund into a consumer’s
bank account after a tax return is electronically
submitted.
The Attorney General will
seek a total of at least $81,000 in fines
for the violations of the New Jersey Consumer
Fraud Act, plus $9,500 for reimbursement of
the state’s investigative costs.
“The storefront signs,
posters and flyers lured consumers in with
false statements. If these businesses really
are offering Refund Anticipation Loans, their
advertisements must fully disclose that fact,”
Attorney General Anne Milgram said. “Our
Advertising Regulations are clear - making
false or misleading representations is unlawful.”
Each of the 38 businesses
(chart attached) was served with a Notice
of Violation. Each inaccurate or misleading
sign, placard or flyer is considered a separate
violation of the Consumer Fraud Act’s
Advertising Regulations. The Attorney General
is seeking a civil fine of $1,500 for each
violation. Each business also must pay $250
to reimburse the state its investigative costs.
“Bottom-line, there
is no such thing as an ‘instant’
or ‘same-day’ tax refund,”
Milgram noted. “The fastest way to get
a refund from the I.R.S. is to electronically
file a return and have the refund direct-deposited
into the consumer’s bank account.”
This enforcement action is
the Attorney General’s latest step in
her continuing effort to crack down on deceptive
sales of predatory Refund Anticipation Loans.
A Refund Anticipation Loan (RAL) is a high-cost
loan that is secured by the taxpayer’s
anticipated tax refund. RALs can carry triple
digit interest rates, hidden fees and may
expose consumers to unpaid debt, if their
tax refund is not as much as expected.
A study by the Consumer Federation
of America and National Consumer Law Center
found that 8.67 million U.S. consumers paid
about $900 million in loan charges and fees
for RALs in 2007. The study also found that
RALs are targeted at the working poor, especially
taxpayers eligible for the Earned Income Tax
Credit, the largest federal anti-poverty program
State consumer affairs investigators
were assisted in last month’s inspections
by county consumer affairs staff in Atlantic,
Bergen, Burlington, Camden, Gloucester, Hunterdon,
Mercer, Middlesex, Monmouth, Ocean, Somerset
and Union counties.
Consumers
who sign up for RALs without receiving full
disclosure of the terms and conditions of
the loans may file a complaint with the Division
of Consumer Affairs by calling 800-242-5846
(within New Jersey) or 973-504-6200
or online at www.njconsumeraffairs.gov
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