More Americans Turn to Costly Tax Refund Loans to Cover Monthly Expenses

[marmar]

More Americans Turn to Tax Refund Loans to Pay Monthly Bills
By Jason M. Breslow


March 5 (Bloomberg) -- When Amy Davis stepped into an H&R Block office in Greenwood, Mississippi, for an advance on her tax refund, it had been three weeks since her last paycheck.

Davis, 48, said she didn’t want to pay more than $300 in fees for a so-called refund anticipation loan of $5,380, but she had little choice. Her bills were mounting and the mother of two didn’t want to risk losing her utilities.

More Americans applied for tax refund loans in 2007, reversing two years of declines, according to a joint study released last week by the Washington-based Consumer Federation of America and the Boston-based National Consumer Law Center.

With the U.S. unemployment rate at 7.6 percent, the highest since 1992, consumer advocate groups say more jobless Americans may turn to high-interest, short-term loans to pay bills.

“You probably have increased demand because more people are struggling with debt,” said Ira Rheingold, executive director of the National Association of Consumer Advocates in Washington. “When people are desperate for cash, they’re desperate for cash.”

Loans secured by a borrower’s expected tax refund often leave borrowers with effective interest rates of as much as 500 percent for a $300 loan over a 10-day repayment period, according to the study from the Consumer Federation of America and the National Consumer Law Center. Lenders also use a pay stub or car title as collateral for similar short-term loans. ........(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601213&sid=au6fbQCmqxe0&refer=home

[Donnachaidh]

1. More Company Store economics

500 per cent interest? :puke:

[Tangerine LaBamba]

2. It's a brilliant racket

And I wish these vultures would get put out of business.

Remember when they first started with this - it was called "Instant Refund," and the poor client didn't know until he'd signed on the dotted line that he was paying through his poor nose for that "Instant Refund."

They got nailed on that, so now it's called a "loan," but there's something so offensive, so craven, so exploitative about the whole thing, it really screams to be put out of business.