Arkansas consumer advocates condemn tax refund loans
By The Associated Press
This article was published January 26, 2010 at 2:25 p.m.
Arkansas consumer advocates warned low-income residents Tuesday to shun offers that promise instant loans backed by their income tax refunds, saying those deals can cost hundreds of dollars and only take a week or so off the wait for a refund.
A new Arkansas law requires businesses to post what they charge and give oral and written disclosures to their customers.
“You’re paying money to borrow your own money,” state Rep. Darrin Williams, D-Little Rock, said at a news conference at a state office where residents can get free tax preparation assistance Saturday.
Without an instant loan, direct deposit refunds take a week or two to reach a filer, and paper refund checks take about three weeks to arrive, said Jane Fisher, senior tax consultant in Little Rock for the Internal Revenue Service.
A study by Arkansas Advocates for Children and Families found the loans appeal most to the poor, and four of the top five Arkansas counties where such loans are made are in the Delta. Phillips County tops the list, with 42 percent of tax filers getting the loans in 2006.
Statewide, 22 percent of tax filers in 2006 used instant loans for their refunds at a cost of nearly $100 million.
Leigh Ann Grinnis, owner of Tax Ladies of Cabot, which performs bookkeeping, payroll and income tax services, said knowing the charges doesn’t dissuade people from making the loans.
“I’ve always explained to (the customers) what the fees were. I don’t find it any different now than before,” Grinnis said.
With the change in the earned income tax credit, more people qualify for refunds, and people who have obtained the credit before are getting larger refunds.
Taxpayers can find free tax-preparation assistance by calling 800-829-1040.
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