Growing Without Rain

News and Views about Taxes

“I vant to be a loan…”

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Let’s get this out of the way at the beginning…

I hate Refund Anticipation Loans (RALs). Most of the tax preparers with whom I work, and with whom I have contact outside of work, hate them too. Marketing them under titles such as “rapid refund”, “express refund”, and so forth is the worst form of misleading advertising possible – they are NOT refunds, they are loans. I’d love to see them go away. That said…

The overwhelming majority of clients that we see who request RALs do not have bank accounts and cannot get them. Most of these clients cash paychecks at the Wal-Mart or the local convenience store , buy money orders to pay for rent and utilities, and deal in cash otherwise. Telling them that, well, the IRS will direct deposit your refund for nothing within 8-15 days doesn’t do them a bit of good when they don’t have a place to receive that direct deposit.

I will grant that most of these people do not (financially) HAVE to take a RAL – but my experience is that no matter how hard you try to steer most clients in a different direction, they come back to the RAL. We offer an alternative product, the Refund Anticpation Check (RAC), which costs less, meets the same need as the RAL, and takes the same amount of time as the IRS process. I spend nearly as much time (if not more) explaining the financial options and the choices that people have when offering bank products as I do preparing the tax return. And they still overwhelmingly choose the RAL, even when I show them exactly what they are paying for the privilege of getting money in hand sooner and no matter how hard I try to have them look at the alternatives. A bird in the hand, and all that…


Written by nctaxpro

January 16, 2010 at 12:34 pm

Posted in Taxes

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