California Reinvestment Coalition

Refund Anticipation Loans

Thinking about receiving your tax refund through a Refund Anticipation Check (RAC) offered by your tax preparer? It’s worth considering some other options.  These checks and the prepaid cards they’re offered on, can take huge bites out of your tax refund, and may not be any faster than getting your money directly from the IRS. Instead, consider having your taxes done for FREE at a local Volunteer Income Tax Assistance (VITA) site. The tax preparers are trained and certified, and you can schedule an appointment to meet with them. Plus, by working with them, you can have your refund deposited electronically into your bank account- FREE!  Visit this website, enter your zip-code, and it will tell you where the closest VITA site is located: VITA locator.

Refund Anticipation Loans, or RALs, are short-term, high-cost bank loans secured by the taxpayer’s expected tax refund. The loans last about 7-14 days until the actual IRS refund repays the loan. Professional tax preparers as well as thousands of small independent preparers broker these loans on behalf of insured financial institutions. The RAL preparer will partner with a bank, which will use the borrower's projected income tax refund as security on the loan. A RAL preparer will typically charge tax preparation fees, loan administration fees and bank fees in addition to other fees that a borrower can avoid by filing directly with the IRS.

CRC and our partners have pushed federal regulators to crack down on these products. Thanks in part to our efforts, JP Morgan Chase, HSBC, and Santa Barbara Bank & Trust have all stopped financing RALs and the most well known RAL preparers - H&R Block and Jackson Hewitt- are no longer offering RALs.

CRC has also worked with the IRS to make it easier for tax filers to get refunds quickly and without expensive fees. The IRS has also announced that it would no longer permit tax preparers to use its so-called “debt indicator” – a major reform that CRC and our allies at the national level have long promoted.

We still have work to do to shut down Liberty Tax Service’s RAL business – the only large RAL predator left which targets primarily low income and African American communities. We are also working to make sure that other tax-based loans and products – such as Refund Anticipation Checks, sometimes also called Electronic Refund Checks- don’t replicate the high costs of RALs.

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