News So, That Horrible Bill I Was Talking About…
posted by on January 30 at 13:45 PM
It’s this.
While Democratic voters are waiting for the Democratic majority to do something about payday loans, it looks like Democrats are moving in the opposite direction.
You’ve heard of refund anticipation loans (RALS)?
These are high-interest loans, brokered through financial companies like H&R Block, that people get using their tax returns as collateral. They’re controversial, like payday loans, because of the high interest and, critics say, because they exploit poor people.
Rep. Sharon Tamiko Santos (D-37, South Seattle) is sponsoring this bill, which would expand the practice by creating a simple process for companies like H&R Block to authorize clerks at 7-11 or Wal-Mart or any accessible retail outlet to act as intermediaries and process the loans.
The bill, which strikes me as handwritten by the industry, popped out of nowhere last Friday—Santos’s co-sponsor is Dan Roach (R-31, East King and Pierce County)—and it has a hearing tonight at 6pm.
At a time when iffy loans are in the news for derailing our entire economy, it seems weird that the legislature would propose a bill that would infect the economy with more potential for widespread funny business.
The rap from proponents is that expanding accessibility to RALS will help people who need loans.
Of course it's a horrible bill.
But, what are you going to DO about it?
the proper way to do the tax refund loans is to automatically deduct the interest out of the lump sum payment. i havent ever met anyone who has received one of these nor gotten one myself but I hope that is how they currently work.
The last thing that people who "need" loans actually need is an easier way to get a loan. From a personal finance perspective, you should never "need" a loan - you should get a loan when you can afford to carry the debt, and when carrying the debt actually makes financial sense (as opposed to paying for whatever-it-is-you-want with cash you already have on hand).
of course any financial tool that fights to have itself be cashed at a 7-11 already seems like a bad idea to begin. you cant buy stock at 7-11, you cant buy a house at 7-11, you cant take out a small business loan at 7-11, but you can send money western union...
think about it
Whoo! Let's get out there and screw over some poor people!
Anyone who is in such desperate straights that they need to take out a loan on a tax refund they'll receive in just a few weeks (depending on how they file, AND if they have a checking or savings account), is simply prey to a predatory lender; and that's all these things are - predatory.
Why, if companies like H&R Block (which, as a volunteer tax preparer, I would NEVER send anyone to in the first place) are so concerned for the well-being of their customers, can't they simply set up a system whereby they loan the refund amount, MINUS A REASONABLE INTEREST PAYMENT of say, 6% or 7%, and have the IRS send THEM the refund directly?
I assume one of the rationalizations they use for charging high interest rates is the potential for defaults or non-reimbursement, since of course, all poor people are evil, scheming, cheats, right? But, if the refund goes directly to the lending institution, that would pretty much solve that problem, and there'd be no justification for charging egregeiously high interest.
Oh, of course. I sometimes forget. These guys aren't in business to be helpful to their clients, but rather to squeeze them like a sponge full of money.
this seems like a business opportunity for someone to undercut H&R Blocks rates on these loans and offer lump sum at % below refund amount.
so i am going to hand my tax return over to the 7-11 clerk? that is just insane.
well said comte; I can't fathom for the life of me how the company that prepares taxes can't have an arrangement made that the refund goes to them, the lump sum goes to the customer minus a 7% fee or something.
Josh, you're obviously an intelligent, thorough reporter, but man back off on those boring pills.
Boring? This is seriously bad news. I can't believe Tamiko Santos is behind this. I'm shocked.
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