 Madigan said her office is monitoring businesses that offer tax-refund
anticipation loans and checks this tax season, in light of a new Illinois law
initiated by her office to crack down on the excessively high fees associated
with these options. The new law, which became effective in January, prohibits
tax preparers from adding unnecessary costs -- or "junk fees" -- for refund
products."With tax season in full swing, tax preparers are once again
flooding the airwaves with ads promising you a faster refund if you buy one of
their loan offerings," Madigan said. "But don't be fooled. The only ones getting
fast cash are the lenders that advertise these refund products, thanks to the
exorbitant fees they charge taxpayers."
Tax preparers often advertise refund anticipation loans as an option for
consumers to receive an instant cash refund based on their anticipated tax
return, supposedly eliminating the wait for their official government refund to
arrive. But in reality, Madigan said, these products are short-term loans
riddled with fees automatically deducted from a taxpayer's refund before the
taxpayer receives it.
Although most banks have stopped offering refund anticipation loans, due to
regulations at the federal level, Madigan said many non-bank lenders, including
payday lenders, have begun to offer these loans to consumers. The law Madigan's
office crafted addresses this industry trend by limiting interest rates on loans
from non-bank lenders to ensure consumers aren't charged for junk fees.
[to top of second column] |
The attorney general also alerted consumers about the dangers of
"refund anticipation checks" or debit cards linked to a temporary
bank account. Consumers do not receive their refunds any faster with
refund anticipation checks, Madigan said, but must wait for the IRS
to deposit their refund into the temporary account. The new law also
applies to these products, which are similarly linked to costly
hidden fees.
Madigan worked to pass the legislation banning high-cost fees
last year around the same time she filed a lawsuit against a
national tax preparer for charging taxpayers at least $800,000 in
hidden costs for services. In March 2012, Madigan filed a lawsuit in
Cook County Circuit Court seeking to shut down Mo' Money locations
in the Chicago area and East St. Louis and to refund consumers. The
Memphis, Tenn.-based company advertised its tax refund anticipation
programs to low-income taxpayers as a way to receive and spend
refunds instantly. But Mo' Money used these programs to
automatically deduct hundreds of dollars in undisclosed fees -- as
much as $700 per person -- before consumers ever received their
refunds. Madigan's Consumer Fraud Bureau is continuing to pursue the
litigation in court.
[Text from file received from the office
of
Illinois Attorney General Lisa
Madigan] |
