Tax refund loans or tax refund anticipation loans as they were known, were always a stinker. People would pay tax preparers a lot in fees just to get their refund a little sooner. But those days are thankfully on the way out.
This excellent article in the Washington Post explains how the loans grew and fell in a need for profits over logic.
Today, with the speed at which the Internal Revenue Service is processing tax refunds, there is no need for a ridiculously expensive tax refund loan.
These high-cost, short-term loans were designed to take advantage of the inefficiency of the Internal Revenue Service, plugging the gap between when taxpayers filed returns and when their refunds came through — very much like a payday loan. An overhaul of the federal tax code intended to put more money in the hands of low-income families sent demand for the advances skyrocketing. At the industry’s peak in the 2000s, more than 12 million people a year took out refund anticipation loans — and paid more than $1 billion in fees. – Read the rest here.
Hopefully the refund loan is now taking it’s last breath and on the way out. That’s great news for consumers who don’t want to get taken advantage of with high fees.
And if you run into someone still offering these loans or someone who is thinking they are a good idea, just ask them one question for me, “What the hell are you thinking?”
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