Legislation Introduced to Protect Low-Income Taxpayers from Unscrupulous Loan Providers

Senator Gordon Smith (R-OR) has introduced the Taxpayer Protection and Assistance Act (S. 832) with a bipartisan group of leading Finance Committee members to improve oversight of businesses that issue Refund Anticipation Loans.

“RALs can be helpful for families in tight financial situations,” said Smith. “But these costs are outrageous and take advantage of people desperate for money. We need to make sure people understand what they’re getting into.”

Refund Anticipation Loans (RALs) are high-interest, high cost short-term loans secured by a taxpayer’s expected tax refund. Over 10 million RALs are taken each year by consumers seeking quick cash in exchange for their tax refunds. In 2003 alone, consumers paid an estimated $1 billion in RAL fees, plus an additional $389 million in administrative or application fees. RAL providers do business mainly with low-income Americans, over half of whom receive the Earned Income Tax Credit.

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