Each year at the beginning of tax season, as regular as the rising and the setting of the sun, consumer groups beg taxpayers not to sign up for refund anticipation loans, or RALs.
They point out that a RAL is a short-term loan backed by a tax refund and that it's a bad deal because of all the fees involved.
Be patient, the groups urge people. If you file your taxes electronically and have your refund directly deposited into your bank account, it could take just two weeks.
But every year, egged on by clever television ads, people get these high-priced loans anyway.
After years of protest and pressure, the Association of Community Organizations for Reform Now (ACORN) has gotten two of the nation's largest tax preparers, H&R Block Inc. and Jackson Hewitt Inc., to promise to improve how they promote, sell and disclose the terms of refund loans. Both companies also agreed to be more upfront with customers about the free options they have for getting their refunds.
H&R Block has also said it will eliminate the administrative fee it charges for refund anticipation loans.
"We will continue to present information about the lowest-cost filing options first and show clients a chart that outlines all of the available filing options, their costs, and the amount of time to receive a refund," said Murray Walton, vice president and chief compliance officer for H&R Block Tax Services.
Jackson Hewitt also has agreed to increase disclosure regarding its tax refund loan products and, in 50 of its markets, to eliminate the application fee it charges RAL customers, according to ACORN.
I'm happy about all the promises. But at least where Jackson Hewitt is concerned, that improved disclosure doesn't apply to television commercials.
In one Jackson Hewitt commercial running now, a taxpayer asks when he will get his refund. The camera cuts to the tax preparer, who tells the fellow to look in his pocket. The camera cuts back to the guy and, lo and behold, his refund is in his shirt pocket.