The National Consumers League (NCL), founded in 1899, sent out a press release this morning condemning refund anticipation loans (RAL). This isn’t big news, and if you ask me, they’re a few weeks late in sending this out. The IRS starts accepting tax returns in mid-January. If you want to warn folks about RALs, that’s the time to do it. Not on April 4, just 11 days (well, 13 days this year) before taxes are due.

But anyway, here’s the scoop: If you go to one of the major tax preparation companies and have a refund coming, they’ll give you the hard pitch about how you can walk out of the place with a stored value card containing your refund — minus processing fees.

In the press release, the NCL cites IRS Data regarding RALs: in 2004, more than 12.38 million Americans applied for RALs and spent $1.6 billion in fees just to access their own tax refunds two weeks earlier. The effective annual interest rate for a RAL varies based on the size of the refund — from 40 percent on a refund up to $9,999 to over 700 percent for a $200 refund. One out of every three taxpayers who claim the Earned Income Tax Credit (EITC), which is specifically for low-income working individuals and families, applied for a RAL.

Sounds pretty darned expensive — and it is. Linda Goloner, President of the NCL says “these predatory lending practices of ‘loaning’ a taxpayer their own tax refund for between a 40 percent and 700 percent interest rate should be outlawed.”

The real problem is that those who can least afford it are the ones who typically get suckered into paying for a RAL. More than 7 million taxpayers who qualifed for an Earned Income Tax Credit, paid $904 million to get their refunds up to 2 weeks sooner.

What many folks don’t understand is just how much profit companies like Jackson Hewitt make from RALs. TONS!

What should you do? Just say no when asked if you want a Refund Anticipation Loan (RAL) or an “instant refund.” Instead, sign up for direct deposit to your bank account. You’ll get your refund in 10 business days or less.

Want to know where your refund is? Go to and click on the link to “Where’s my refund?” If you want more information on the NCL, go to

Published: Apr 4, 2006