Usury part 2- tax refund loans

[EVT1]

Was driving in today and saw the sign twirlers out wearing the statue of liberty outfits- it is amazing how fast these little stores open up.

I thought payday lenders were bad- but these are even worse looking at the numbers.  Unless I am missing something these are  super short-term loans that are pretty much no risk- yet the charges are huge. It appears they use the same trick as credit cards by using banks in states with no usury laws.

www.bankrate.com/brm/itax/news/20030127a1.asp

Just another reason to overhaul the tax code- no one should be getting refunds in the first place creating a market for these scumbags to operate in.

[justme]

Didn't they do something a few years back to stop that but then they found a loophole?

As for making people not have large refunds...good luck convincing people that's better for them!

[EVT1]

Not sure- but it is huge loophole.

If people just want extra taken out of their checks so they get a refund- have at it. But the problem I see is that the people using these are on the financial edge to start with, and may only get a refund because of tax credits, not because they paid in too much.

So the way I see it, the government subsidizes low income workers so Wally world has cheap labor, they get a large amount of that assistance via tax credits, and to make sure they only get a percentage of that help, Wally, banks, and the usual financial rapists jump in to take some of it.

As fast as electronic filing is these days they could get their refund in a week for free- but of course that requires a checking account, internet access and good information- something people on the margins might not have.  What galls the shit out of me is that these scumbags are basically floating them a near zero risk loan for a week and charging them a rate so high even the mafia would be ashamed to charge.  Yet there is a jackass wearing an Uncle Sam costume waving people in- like cheese in a mouse trap.

[AgeOfEnlightenmentSCP]

Jan 13, 2015 14:19:28 GMT -5 EVT1 said:

Was driving in today and saw the sign twirlers out wearing the statue of liberty outfits- it is amazing how fast these little stores open up.

I thought payday lenders were bad- but these are even worse looking at the numbers.  Unless I am missing something these are  super short-term loans that are pretty much no risk- yet the charges are huge. It appears they use the same trick as credit cards by using banks in states with no usury laws.

www.bankrate.com/brm/itax/news/20030127a1.asp

Just another reason to overhaul the tax code- no one should be getting refunds in the first place creating a market for these scumbags to operate in.

Agree.  Time to repeal the Current Tax Payment Act of 1943.  The IRS can send out a bill at tax time, and people can pay what they owe. The IRS shouldn't be taking theirs off the top and using it all year long interest free.

www.americanthinker.com/articles/2013/03/repeal_the_current_tax_payment_act_of_1943.html

[bean29]

Jan 14, 2015 10:21:42 GMT -5 AgeOfEnlightenmentSCP said:

Jan 13, 2015 14:19:28 GMT -5 EVT1 said:

Was driving in today and saw the sign twirlers out wearing the statue of liberty outfits- it is amazing how fast these little stores open up.

I thought payday lenders were bad- but these are even worse looking at the numbers.  Unless I am missing something these are  super short-term loans that are pretty much no risk- yet the charges are huge. It appears they use the same trick as credit cards by using banks in states with no usury laws.

www.bankrate.com/brm/itax/news/20030127a1.asp

Just another reason to overhaul the tax code- no one should be getting refunds in the first place creating a market for these scumbags to operate in.

Agree.  Time to repeal the Current Tax Payment Act of 1943.  The IRS can send out a bill at tax time, and people can pay what they owe. The IRS shouldn't be taking theirs off the top and using it all year long interest free.

www.americanthinker.com/articles/2013/03/repeal_the_current_tax_payment_act_of_1943.html

LOL because that would work.  It would be just like trying to collect rent from my BIL and SIL.  The government would come behind every other want the people have.

It is my understanding that the government is discouraging the "tax anticipation loans" but I am not sure how.  I think there are more preparer penalties and more requirements for the education level of tax preparers.  The "Tax anticipation loans" used to lean heavily on people getting Earned Income Credits.  There was some fraud going on where the large tax firms were preparing all low income tax returns as if they were eligible for the Earned income credit but a segment of this population is not eligible and they were ignoring that fact. 

[haapai]

I suspect that family dysfunction, not financial illiteracy is what creates demand for such loans. 

It's about filing first, before someone else files with the kids as dependents. 

[Rocky Mtn Saver]

Jan 13, 2015 14:19:28 GMT -5 EVT1 said:

Was driving in today and saw the sign twirlers out wearing the statue of liberty outfits- it is amazing how fast these little stores open up.

I thought payday lenders were bad- but these are even worse looking at the numbers.  Unless I am missing something these are  super short-term loans that are pretty much no risk- yet the charges are huge. It appears they use the same trick as credit cards by using banks in states with no usury laws.

www.bankrate.com/brm/itax/news/20030127a1.asp

Just another reason to overhaul the tax code- no one should be getting refunds in the first place creating a market for these scumbags to operate in.

Just to clarify a couple of things:  Your link is outdated from 2006.  The legislation does mean they're not necessarily the same things they were before.  For example, Jackson Hewitt offers a small Refund Advance that's 0% interest.  offers.jacksonhewitt.com/tax-preparation/special-offers/tax-return-advance-200?_vsrefdom=&keyword=

As for the risk, keep in mind that many of the same folks who will want to take out such a loan will also have their refunds grabbed by the IRS or other agency and the lender then has to try to get paid just like any other unsecured lender. 

[AgeOfEnlightenmentSCP]

Jan 14, 2015 11:24:39 GMT -5 haapai said:

I suspect that family dysfunction, not financial illiteracy is what creates demand for such loans. 

It's about filing first, before someone else files with the kids as dependents. 

Hmmm, never thought of that- but you're probably on to something there.

[Rocky Mtn Saver]

Jan 14, 2015 11:24:39 GMT -5 haapai said:

I suspect that family dysfunction, not financial illiteracy is what creates demand for such loans. 

It's about filing first, before someone else files with the kids as dependents. 

How does the need to file early (and yes, it certainly happens) for this reason equate to driving demand for a Refund Anticipation Loan (or whatever they're calling it now)?  I'm just legit curious about the connection you're drawing. 

[EVT1]

If you read into it these companies are aware via the IRS if there are issues- so I am not buying the risk argument.

Also- one company doing it right in no way absolves the scumbags who are not.

You really want to defend these bottom feeders in any way?

BTW just grabbed a quick link- as this started bugging me after seeing the sign twirlers on the way to work, not after reading an article. I am sure I can find an up to date source that confirms my belief that these people are still shitting on the poor.

[Rocky Mtn Saver]

Jan 14, 2015 12:19:56 GMT -5 EVT1 said:

If you read into it these companies are aware via the IRS if there are issues- so I am not buying the risk argument.

Also- one company doing it right in no way absolves the scumbags who are not.

You really want to defend these bottom feeders in any way?

BTW just grabbed a quick link- as this started bugging me after seeing the sign twirlers on the way to work, not after reading an article. I am sure I can find an up to date source that confirms my belief that these people are still shitting on the poor.

I'm not saying it's good or bad, I'm just saying that if you're going to debate a subject, use correct information to debate it. 

As for the creditor knowing in advance if a person will have their refund grabbed, that's not really the norm these days:

en.wikipedia.org/wiki/Refund_anticipation_loan. 
On August 5, 2010, the IRS announced that for the upcoming 2011 tax filing season, the agency would no longer be providing preparers and associated financial institutions with the “debt indicator” (a one-letter code that discloses whether or not the taxpayer owes back taxes and whether or not the taxpayer owes federally collected obligations such as child support, student loans, etc.).[18][19] The result of this has pushed most tax preparers other than national chains out of the RAL business,[citation needed] and many smaller preparers have simply gone out of business due to losing that chunk of their business. All but two banks have dropped out of the RAL programs.[citation needed]  Taxpayers themselves will continue to have access to information about their refund through the “Where’s My Refund?” feature at the irs.gov website.[19]
 

[haapai]

You're right that the desire to file first and the desire to take out a loan for the refund amount are separate issues. 

If you live on your own, have the legal right to file as you did, and don't have to worry about anyone else opening your mail or accessing your bank account, there really isn't any reason to take out the loan. 

But if you don't have those things, taking the money in cash really simplifies things.  You don't have to worry about the bank account into which an improperly filed refund was deposited getting frozen.  You don't have to worry about a refund check being plucked out of your pile of mail.  You don't have a social worker demanding that the money be spent immediately. 

Being able to do what you want to with the money before someone else knows that you have it is worth quite a bit.  I wouldn't be a bit surprised if Swamp takes in a ton of retainers this week.  Electronic W-2s came out Monday. 

[Rocky Mtn Saver]

Interesting points, haapai.  People do spmetimes have crazy home situations, unfortunately.  But I'm not sure I see it as nearly as much of a factor as you do.  I'm much more on the side of the 'lack of financial skill and application' side of things. 

[ArchietheDragon]

given the choice between $300 now or $500 in 3 weeks many people will take the $300 now.    It is free money anyway. 

[Value Buy]

Jan 14, 2015 12:52:49 GMT -5 ArchietheDragon said:

given the choice between $300 now or $500 in 3 weeks many people will take the $300 now.    It is free money anyway. 

Only to the person who gets the check

[EVT1]

Jan 14, 2015 12:38:10 GMT -5 Rocky Mtn Saver said:

Jan 14, 2015 12:19:56 GMT -5 EVT1 said:

If you read into it these companies are aware via the IRS if there are issues- so I am not buying the risk argument.

Also- one company doing it right in no way absolves the scumbags who are not.

You really want to defend these bottom feeders in any way?

BTW just grabbed a quick link- as this started bugging me after seeing the sign twirlers on the way to work, not after reading an article. I am sure I can find an up to date source that confirms my belief that these people are still shitting on the poor.

I'm not saying it's good or bad, I'm just saying that if you're going to debate a subject, use correct information to debate it. 

As for the creditor knowing in advance if a person will have their refund grabbed, that's not really the norm these days:

en.wikipedia.org/wiki/Refund_anticipation_loan. 
On August 5, 2010, the IRS announced that for the upcoming 2011 tax filing season, the agency would no longer be providing preparers and associated financial institutions with the “debt indicator” (a one-letter code that discloses whether or not the taxpayer owes back taxes and whether or not the taxpayer owes federally collected obligations such as child support, student loans, etc.).[18][19] The result of this has pushed most tax preparers other than national chains out of the RAL business,[citation needed] and many smaller preparers have simply gone out of business due to losing that chunk of their business. All but two banks have dropped out of the RAL programs.[citation needed]  Taxpayers themselves will continue to have access to information about their refund through the “Where’s My Refund?” feature at the irs.gov website.[19]
 

Was not aware of that- I hope that is still in effect- sounds like something the banking lobby would have fixed by now.

[Deleted]

Jan 14, 2015 12:52:49 GMT -5 ArchietheDragon said:

given the choice between $300 now or $500 in 3 weeks many people will take the $300 now.    It is free money anyway. 

And that says a LOT about the people taking those "$300 now!" payments.

I can understand it if it's an anomaly. Like normally the person wouldn't, but they are in a "living payday-to-payday" situation, and the day before they had the taxes done, their transmission went kaplooey, so they NEED it... but normally they wouldn't.

O.k. Sometimes stuff happens.

But the people that do it year in and year out? Yup. They didn't learn their math properly in school.