Payday loan and income tax refund
Date: Wed, 02/13/2008 - 19:37
I got this email and thought it was interesting. I hope it is okay for me to post it, if not I'm sorry.
GRASSLEY, SCHUMER WARN PAYDAY LENDERS: STAY AWAY FROM AMERICANSâ€*
REBATE
CHECKS
With Uncle Sam About To Mail Rebate Checks To Help Jumpstart Economy,
Scams
May Emerge Promising Money Up Front*But With a Catch
In Letter, Senators Urge Top Payday Loan Companies And Tax Preparers To
Steer Clear of Predatory Tactics
Similar to So-Called "Refund Anticipation Loans," Payday Loans on
Rebate
Checks Could Carry Interest Rates Far Higher Than 100%
WASHINGTON, DC*With Congress passing an economic stimulus package last
week
that the President is expected to sign on Wednesday, U.S. Senators
Chuck
Grassley and Charles E. Schumer today warned the nation's leading tax
preparers and payday loan companies to steer clear of so-called
"instant
rebates" that could bilk Americans out of huge portions of their rebate
checks.
The senators said today that families who should receive large rebate
checks in the next few months need to beware promises of upfront loans
that
promise refunds without the wait, but that come with massive interest
rates
and hidden fees. The senators noted that taxpayers * particularly
families
with children that are due to get back the largest amounts * could lose
out
on hundreds of dollars if lured by these payday loan companies.
Grassley said, "These rebates are meant to put money in people's hands,
not
increase their debt. Taxpayers should understand that refund
anticipation
loans are just that * loans. As loans, they can carry very high
interest
charges that make them a very bad deal for the taxpayer. The companies
that
offer these loans need to stand down and not try to exploit an economic
downturn for their gain at taxpayer expense."
Schumer said, "We've all seen the catchy slogans and colorful
advertisements for RALs: Simply sign a form, pay a fee, and walk out
with
cash against your coming refund check. Well, we don't want something
similar to happen with these rebate checks. These checks are meant to
be a
shot in the arm for taxpayers who are struggling, not open season for
scam
artists. Tax preparers often charge interest rates for these loans that
can
run on well into triple figures, all for the privilege of getting money
a
few days or weeks earlier. The American people are getting a boost from
us
and desperately need that check as soon as we are able to provide it to
them. In fact, many families are so cash-strapped, I am worried that
they
may not even wait for the IRS to send them a check but instead turn to
a
payday loan or similar product."
In their letter, which was sent to the chairman of the Financial
Services
Centers of America as well as tax preparers like H&R Block and Jackson
Hewitt, the senators demanded that these companies not "take any
actions
that will be harmful and undermine the intended goals of the
legislation of
getting the full amount of the tax rebate into the hands of individuals
who
will increase spending in the economy." Schumer and Grassley added, "We
will be monitoring this matter closely and will look to federal and
state
regulators to fully examine this issue if there are any improprieties."
On Thursday, both the House and Senate passed a stimulus package that
rushes rebates of $600 to $1,200 to most taxpayers and $300 checks to
disabled veterans, the elderly and other low-income people. President
Bush
indicated he would sign the measure on Wednesday.
Grassley and Schumer today warned Americans to avoid anticipated scams
where tax preparers and payday loan vendors promise rebate checks up
front
or instantly because these deals usually carry huge interest rates and
hidden fees. Companies, like H&R Block and Jackson Hewitt, typically
offer
such advances on taxpayers refunds, called "Refund Anticipation Loans"
or
"RALs". The IRS has publicly expressed concerns that because these are
the
largest rebate checks ever issued, these companies are likely to push
these
scams right away.
RALs are high cost loans secured by and repaid directly from the
proceeds
of a taxpayer's refund from the IRS. In the case of the stimulus
checks,
consider a married couple with two children, expecting a $1,600 check
in
May, and a RAL provider or loan vendor promises to give them $1,400 in
March instead. This means they are being charged an interest rate of 87
percent and this doesn't include any hidden processing fees and taxes
that
typically come with these loans.
The IRS has already announced that it may ban the practice altogether
by
next year.
A copy of Grassley and Schumer's letter appears below. The letter went
to
the following companies:
Kenneth E. Compton
President and Chief Executive Officer
Advance America, Cash Advance Centers, Inc.
135 North Church Street
Spartanburg, SC 29306
Jared Davis and David Davis
Chief Executive Officers
Check 'n Go
5155 Financial Way
Mason, OH 45040
Jay B. Shipowitz
President and Chief Executive Officer
Ace Cash Express
1231 Greenway Drive, Suite 600
Irving, TX 75038
Alan Bennett
Interim Chief Executive Officer
H&R Block
1 H&R Block Way
Kansas City, MO 64105
Mr. Joe Coleman, Chairman
Financial Services Centers of America
Court Plaza South, East Wing
21 Main Street, 1st Floor
Hackensack, NJ 07602
Michael C. Yerington
President and Chief Executive Officer
Jackson Hewitt
3 Sylvan Way, Box 264
Parsippany, NJ 07054
* * *
February 11, 2008
Dear Sir,
We are writing to the leading organizations and businesses in the tax
preparation, payday loan, and check cashing industries to express a
concern
that we have relating to the economic stimulus package passed by
Congress
last week.
As you know, the lion's share of the stimulus package is a rebate check
that will go to all working families: a maximum of $600 for singles and
$1,200 for married couples, as well as $300 per child. In addition, the
legislation includes a modification by the Senate that will provide
checks
to low-income seniors and disabled veterans (or their widow/er). This
will
provide a much-needed benefit to these families and help encourage
spending. These checks will begin to be mailed once the busiest part of
the
2007 tax filing season has ended, probably by mid-to-late May, and it
may
take ten weeks for all of the checks to be mailed. We are working
closely
with the Internal Revenue Service to make sure that the checks can be
processed as quickly as possible.
These rebate checks are meant to be money in the pockets of working
families, veterans, and seniors * not money in the till for tax
preparers
or payday loan vendors. We are determined that members of your
industries
not take any steps to publicize or otherwise encourage working
families,
veterans, or seniors to take a loan or other credit arrangement based
on
the rebate checks approved by Congress. Such actions will be harmful
and
undermine the intended goals of the legislation * namely, getting the
full
amount of the tax rebate into the hands of individuals and families who
will spend the money and provide a short-term boost to the economy.
Here are a couple of examples to clarify our concern. Consider a
married
couple with three children that is expecting a $2,100 check in June.
Clearly, it is not the intent of Congress that a payday lender, tax
preparer, or other entity would offer that family $1,600 in April in
exchange for the $2,100 check two months later. Such an "advance" of
the
rebate would represent a loan at an annualized interest rate of 190
percent. Or consider a single mother with two children that pays a $200
fee
to get her rebate back 60 days faster * which amounts to a 122 percent
interest rate on the $1,000 loan she receives. Clearly, it is the
intent of
Congress that these checks should go into the pocketbooks and checking
accounts of working families * not to enrich unscrupulous lenders. We
will
be monitoring this matter closely and will look to federal and state
regulators to fully examine this issue if there are any improprieties.
In addition, we are particularly concerned that tax-exempt entities
that
engage in payday loans not engage in this behavior. We view such
actions as
raising legitimate concerns about whether such an effort would be in
keeping with their tax-exempt status.
Thank you for your time and courtesy on this important matter.
Sincerely,
Senator Chuck Grassley Senator Charles E. Schumer
GRASSLEY, SCHUMER WARN PAYDAY LENDERS: STAY AWAY FROM AMERICANSâ€*
REBATE
CHECKS
With Uncle Sam About To Mail Rebate Checks To Help Jumpstart Economy,
Scams
May Emerge Promising Money Up Front*But With a Catch
In Letter, Senators Urge Top Payday Loan Companies And Tax Preparers To
Steer Clear of Predatory Tactics
Similar to So-Called "Refund Anticipation Loans," Payday Loans on
Rebate
Checks Could Carry Interest Rates Far Higher Than 100%
WASHINGTON, DC*With Congress passing an economic stimulus package last
week
that the President is expected to sign on Wednesday, U.S. Senators
Chuck
Grassley and Charles E. Schumer today warned the nation's leading tax
preparers and payday loan companies to steer clear of so-called
"instant
rebates" that could bilk Americans out of huge portions of their rebate
checks.
The senators said today that families who should receive large rebate
checks in the next few months need to beware promises of upfront loans
that
promise refunds without the wait, but that come with massive interest
rates
and hidden fees. The senators noted that taxpayers * particularly
families
with children that are due to get back the largest amounts * could lose
out
on hundreds of dollars if lured by these payday loan companies.
Grassley said, "These rebates are meant to put money in people's hands,
not
increase their debt. Taxpayers should understand that refund
anticipation
loans are just that * loans. As loans, they can carry very high
interest
charges that make them a very bad deal for the taxpayer. The companies
that
offer these loans need to stand down and not try to exploit an economic
downturn for their gain at taxpayer expense."
Schumer said, "We've all seen the catchy slogans and colorful
advertisements for RALs: Simply sign a form, pay a fee, and walk out
with
cash against your coming refund check. Well, we don't want something
similar to happen with these rebate checks. These checks are meant to
be a
shot in the arm for taxpayers who are struggling, not open season for
scam
artists. Tax preparers often charge interest rates for these loans that
can
run on well into triple figures, all for the privilege of getting money
a
few days or weeks earlier. The American people are getting a boost from
us
and desperately need that check as soon as we are able to provide it to
them. In fact, many families are so cash-strapped, I am worried that
they
may not even wait for the IRS to send them a check but instead turn to
a
payday loan or similar product."
In their letter, which was sent to the chairman of the Financial
Services
Centers of America as well as tax preparers like H&R Block and Jackson
Hewitt, the senators demanded that these companies not "take any
actions
that will be harmful and undermine the intended goals of the
legislation of
getting the full amount of the tax rebate into the hands of individuals
who
will increase spending in the economy." Schumer and Grassley added, "We
will be monitoring this matter closely and will look to federal and
state
regulators to fully examine this issue if there are any improprieties."
On Thursday, both the House and Senate passed a stimulus package that
rushes rebates of $600 to $1,200 to most taxpayers and $300 checks to
disabled veterans, the elderly and other low-income people. President
Bush
indicated he would sign the measure on Wednesday.
Grassley and Schumer today warned Americans to avoid anticipated scams
where tax preparers and payday loan vendors promise rebate checks up
front
or instantly because these deals usually carry huge interest rates and
hidden fees. Companies, like H&R Block and Jackson Hewitt, typically
offer
such advances on taxpayers refunds, called "Refund Anticipation Loans"
or
"RALs". The IRS has publicly expressed concerns that because these are
the
largest rebate checks ever issued, these companies are likely to push
these
scams right away.
RALs are high cost loans secured by and repaid directly from the
proceeds
of a taxpayer's refund from the IRS. In the case of the stimulus
checks,
consider a married couple with two children, expecting a $1,600 check
in
May, and a RAL provider or loan vendor promises to give them $1,400 in
March instead. This means they are being charged an interest rate of 87
percent and this doesn't include any hidden processing fees and taxes
that
typically come with these loans.
The IRS has already announced that it may ban the practice altogether
by
next year.
A copy of Grassley and Schumer's letter appears below. The letter went
to
the following companies:
Kenneth E. Compton
President and Chief Executive Officer
Advance America, Cash Advance Centers, Inc.
135 North Church Street
Spartanburg, SC 29306
Jared Davis and David Davis
Chief Executive Officers
Check 'n Go
5155 Financial Way
Mason, OH 45040
Jay B. Shipowitz
President and Chief Executive Officer
Ace Cash Express
1231 Greenway Drive, Suite 600
Irving, TX 75038
Alan Bennett
Interim Chief Executive Officer
H&R Block
1 H&R Block Way
Kansas City, MO 64105
Mr. Joe Coleman, Chairman
Financial Services Centers of America
Court Plaza South, East Wing
21 Main Street, 1st Floor
Hackensack, NJ 07602
Michael C. Yerington
President and Chief Executive Officer
Jackson Hewitt
3 Sylvan Way, Box 264
Parsippany, NJ 07054
* * *
February 11, 2008
Dear Sir,
We are writing to the leading organizations and businesses in the tax
preparation, payday loan, and check cashing industries to express a
concern
that we have relating to the economic stimulus package passed by
Congress
last week.
As you know, the lion's share of the stimulus package is a rebate check
that will go to all working families: a maximum of $600 for singles and
$1,200 for married couples, as well as $300 per child. In addition, the
legislation includes a modification by the Senate that will provide
checks
to low-income seniors and disabled veterans (or their widow/er). This
will
provide a much-needed benefit to these families and help encourage
spending. These checks will begin to be mailed once the busiest part of
the
2007 tax filing season has ended, probably by mid-to-late May, and it
may
take ten weeks for all of the checks to be mailed. We are working
closely
with the Internal Revenue Service to make sure that the checks can be
processed as quickly as possible.
These rebate checks are meant to be money in the pockets of working
families, veterans, and seniors * not money in the till for tax
preparers
or payday loan vendors. We are determined that members of your
industries
not take any steps to publicize or otherwise encourage working
families,
veterans, or seniors to take a loan or other credit arrangement based
on
the rebate checks approved by Congress. Such actions will be harmful
and
undermine the intended goals of the legislation * namely, getting the
full
amount of the tax rebate into the hands of individuals and families who
will spend the money and provide a short-term boost to the economy.
Here are a couple of examples to clarify our concern. Consider a
married
couple with three children that is expecting a $2,100 check in June.
Clearly, it is not the intent of Congress that a payday lender, tax
preparer, or other entity would offer that family $1,600 in April in
exchange for the $2,100 check two months later. Such an "advance" of
the
rebate would represent a loan at an annualized interest rate of 190
percent. Or consider a single mother with two children that pays a $200
fee
to get her rebate back 60 days faster * which amounts to a 122 percent
interest rate on the $1,000 loan she receives. Clearly, it is the
intent of
Congress that these checks should go into the pocketbooks and checking
accounts of working families * not to enrich unscrupulous lenders. We
will
be monitoring this matter closely and will look to federal and state
regulators to fully examine this issue if there are any improprieties.
In addition, we are particularly concerned that tax-exempt entities
that
engage in payday loans not engage in this behavior. We view such
actions as
raising legitimate concerns about whether such an effort would be in
keeping with their tax-exempt status.
Thank you for your time and courtesy on this important matter.
Sincerely,
Senator Chuck Grassley Senator Charles E. Schumer
Thank you for posting that. Hurray to the senators for looking o
Thank you for posting that. Hurray to the senators for looking out for all of us and slamming the sleeball payday lenders.
Thanks for sharing. It is sad but true. These companies will d
Thanks for sharing. It is sad but true. These companies will do whatever it takes to put money into their own pockets. Best to just wait it out and get your check when the government sends them.
