April 16, 2007: Consumer Groups Successfully Eliminate Predatory Tax Loans

(San Francisco, CA) Santa Barbara Bank & Trust (SBBT) announced Tuesday that they will stop offering pay stub Refund Anticipation Loans (RALs). This decision came after the bank met with the California Reinvestment Coalition (CRC) and received a letter from CRC and 25 other community groups urging them to discontinue the product.

Pay stub RALs were high cost loans financed by banks like SBBT that big name tax preparers like H&R Block and Jackson Hewitt offered to tax filers in November and December. Tax preparers used customers’ most recent pay stubs to estimate their tax refund without ever seeing their W-2 and other required tax documentation.  This predatory product was targeted at low wage tax filers and worked very much like a payday loan.

Santa Barbara Bank &Trust is the last bank to announce that they will stop offering pay stub RALS.  HSBC and JP Morgan Chase pledged to cease from offering these costly and risky loans in the last month. CRC also met with HSBC and JP Morgan Chase about their predatory loans. Advocates consider the termination of pay stub RALs a great success, but are aware that this is just a first step in eliminating tax Refund Anticipation Loans that continue to strip money from low wage workers. Consumer groups and legislators will continue to crack down on banks and tax preparers who prey on tax filers.