New York - Saying "low income New Yorkers deserve better," State Senator Liz Krueger has applauded New York State's Division of Human Rights for filing a civil complaint against Jackson Hewitt and Liberty Tax Service, two tax preparation companies believed to target high-interest loans to Black, Hispanic and Military families against their income tax rebates. To protect these families Krueger introduced the Refund Anticipation Loan Act, in April of 2004. Unfortunately, Senate Republicans have blocked the bill from moving forward.

"Consumers are being misled into thinking that refund anticipation loans are merely quick refunds," Krueger said. "By targeting families that are often strapped for cash already, these loans against a family's tax rebate can end up costing them more than the rebate they end up getting because of administration and processing fees, along with very high interest rates and other predatory charges."

Refund Anticipation Loans are short-term, high cost loans secured by and repaid from the proceeds of a consumer’s tax refund from the Internal Revenue Service. Instead of waiting to receive tax refunds, RAL customers borrow against part or all of their expected tax refund. Consumers pay several fees to get a RAL, including a loan fee for the RAL, a fee to set up a "dummy" bank account into which the IRS will wire the tax refund, an “administrative” or “electronic filing” fee, and a fee to a commercial tax preparer for filling out the federal and state tax forms.  In 2004, typical loan fees ranged from $35 to $105. Administrative fees can range from $30 to $55, and tax preparation fees average around $120. What the consumer receives in hand is the refund minus the loan fee, the administrative fee, and the tax preparation fee. For the average refund of about $2,100, the total amount of the three fees might be around $250.