Refund Anticipation Loan Tactics May Be Discriminatory!

Human Rights Commissioner Kumiki Gibson is investigating some big name tax preparation companies and banks in an effort to find out if they are engaging in illegal discrimination against Blacks and Latinos.

At issue are Refund Anticipation Loans (RALs), money advanced to taxpayers based on an anticipated tax refund. These loans get a big push in minority neighborhoods. Consumers are charged anywhere from 85% to 500% in interest. A recent study by a Manhattan think-tank revealed that the loans drained about $324 million from the poorest neighborhoods from 2002 through 2005.

It has been argued that there is no need for anyone to have an RAL because the IRS can wire funds to taxpayers within 2 weeks of getting a tax return. So, based on the interest rates, etc. it is completely unnecessary to see these types of loans being heavily pushed to low-income consumers.

RALs have never been investigated as a civil rights issue, until now. The Human Rights Commission chose to investigate these loans, without being pressed to do so by consumers.

Ms. Gibson told the NY Daily News, “These products are not beneficial to people who are struggling financially.” She is looking at illegal discrimination because the RALs are pushed almost exclusively in Black and Latino neighborhoods.

Source: NY Daily News, March 15, 2007, “Shark Hunter on a mission,” by Errol Louis.