Handy Fact Sheet on Refund Anticipation Loans

October 14th, 2009

5.8 million – RALs made by the three largest RAL providers in TY 2006:

Jackson Hewitt – 1.3 million
Liberty Tax Service – 0.3 million
H&R Block – 4.0 million

Corporate investors: Pacific Capital Bancorp, Republic Bank & Trust, JP Morgan Chase Bank, River City, and HSBC.

8.67 million: Number of RALs originated in TY 2007:

$901 million: Fees on RALs originated during that year.

$336 million: Additional money spent by taxpayers on the new refund anticipation check product.

Three to Nine Days: time saved by getting a RAL, as opposed to using IRS e-file service.

$34 to $130: Standard range of fees for a RAL. This includes the “bank fee” and the “refund account fee.” Most tax preparers add other fees. Additional fees include:

E-filing fee
Service bureau fee
Transmission fee
Processing fee
Application fee

Preparers also levy fees for the accounts that are created to hold the refund:

fee to provide consumer with a prepaid debit card to store the RAL
fee to spend or to make additional deposits on the prepaid debit card
monthly account servicing fees on debit card

50 to 500 percent: Range of APRs on RALs. APR range reflects difference in return time of RALs, plus difference in fee structures among different RAL providers.

96 percent: Share of respondents who, upon reading an explanation about RALs, believe that Congress should pass legislation to regulate or eliminate RALs.

63 percent: share of RAL consumers (5.7 million) who were also recipients of the Earned Income Tax Credit in TY 2007.

$627 million: amount shaved off of refunds generated from Earned Income Tax Credits in TY 2007.

11: Number of criminal tax fraud cases filed in 2007 that involved RALs.

Sources for Handy Facts:

National Consumer Law Center

Americans for Fairness in Lending