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Refund Anticipation Loans

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Tax Refund Anticipation Loans (RALs) are short-term cash advances against a customer's anticipated income tax refund. But the loans are offered at high interest rates, ranging from about 40% to over 700% APR. Also, they speed up the refund process by as little as one week, compared to what consumers can expect by filing online and having their refunds deposited directly into their banking accounts. There were over 12 million RAL borrowers in 2003.

Tax preparers and lenders strip about $1.57 billion in fees each year from the earned-income tax credits paid to working parents, according to a 2005 study by the National Consumer Law Center.

Briefs & Factsheets

Refund Anticipation Loans: Are They Worth It?
Michelle Singletary discusses the costs of these high-priced loans, from BlackAmericaWeb. More >

Reports & Papers

Another Year of Losses
High-Priced Refund Anticipation Loans Continue to Take a Chunk Out of Americans' Tax Refunds, NCLC reports. More >

Policy Recommendations

Building a Better Refund Anticipation Loan
A well-designed RAL program can actually benefit consumers.. Guidance on evaluating and developing a worthwhile product. More >


Step in the Right Direction
The nationwide decline in RAL usage among low-income working families is a promising trend, one that will hopefully accelerate as consumers learn more about the high costs of these products and alternatives for receiving their refund dollars.
A Brookings Institution report


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