| NEWARK
– As the April 17th tax filing deadline
nears, Attorney General Zulima V. Farber
and Consumer Affairs Director Kimberly Ricketts
advise consumers to be aware of the costs
associated with refund anticipation loans,
which are also known as “instant tax
refund loans.”
A refund anticipation loan is a loan that
is secured by the taxpayer’s anticipated
tax refund and is offered by businesses
that range from tax preparation firms to
automobile dealerships. They have been touted
as providing fast cash to taxpayers or as
a short cut to obtaining a refund but, in
reality, they are expensive short-term loans.
The
amount of the refund anticipation loan is
the amount of the tax refund, minus interest
and fees. The fees often include a loan
fee, electronic filing fee, document preparation
fee, tax preparation fee and perhaps an
additional check cashing fee once the taxpayer
receives the loan check. The loan is repaid
from the taxpayer’s actual refund,
which is directly deposited with the lending
institution that provided the loan.
A 2005 report by the Consumer Federation
of America and National Consumer Law Center
found that consumers paid more than $1.4
billion in loan charges and fees for refund
anticipation loans in 2003.
“The
adage ‘haste makes waste’ is
certainly true with refund anticipation
loans,” Attorney General Farber said.
“These loans are not free, and consumers
who sign up ultimately receive less money.”
“Consumers
should not be pressured into signing up
for a refund anticipation loan. It’s
optional and consumers can just say ‘no.’
If consumers want to receive their full
refunds as quickly as possible, they may
want to consider filing their returns electronically
rather than mail the documents,” Consumer
Affairs Director Ricketts said.
If a taxpayer decides to obtain a refund
anticipation loan, they should carefully
read any documents provided for their signature,
especially the fine print. Any loan documents
should include the following:
- Annual
percentage rate of the loan
-
Schedule of all charges and fees
-
Maturity date of the loan
-
List of all charges for electronic filing
-
Date or period within which the loan
money will be received
-
Who is responsible for paying the loan
if it exceeds the actual refund, minus
any interest and fees
Consumers
who believe they signed up for refund anticipation
loans without receiving full disclosure
of the terms and conditions or who have
other concerns about tax preparation services
offered can file a complaint with Consumer
Affairs by calling 800-242-5846
(within New Jersey) or 973-504-6200
or online at www.NJConsumerAffairs.gov
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