The End of Tax Return Loans

Each person who has had their taxes prepared by H & R Block or Jackson Hewitt has heard of refund anticipation loans, also referred to as RAL. Regulation changes for this tax season has taken H & R Block out of the race on these. However, in the future they will no longer be offered at all.

What is a refund anticipation loan? It is basically a loan against the tax refund you are expecting at an outrageous interest rate. For some people, their refunds are available in days, making the rate even higher. People request these loans because they need the money right now, not in a few days. However, the FDIC considers these to be unsound as well as unsafe, taking millions of dollars away from people that need it the most.

With the increasing number of people filing their federal taxes electronically, the time which it takes to receive your refund is greatly reduced. For this reason, a refund anticipation loan may only be in effect for up to 15 days. If there were no loans available, people would learn to wait for the deposit from the Federal Government.

The history behind refund anticipation loans goes back many years. When they were first initiated, tax refund payments could take weeks to receive, even months. This was a time when almost no one had the ability to file their taxes on their own, online. Today, everyone has the ability to file their own taxes online or have them done for them at a low cost or at no cost.

Because of the recent changes in the financial sector and regulatory changes, this type of loan will soon be discontinued. As it stands today, only one bank will continue these loans if they win their case against the FDIC which is pending. All of the three banks that are still offering this type of loan for the current tax season were told that they will have to discontinue them. Only one has chosen to dispute this.

People today need the cash fast, but they need to not throw away hundreds of dollars to get their cash fast. The fact is that filing online and using direct deposit will provide them with their refund quickly. Depending on the timing of the filing it can take as little as eight days to get the deposit into your account. This process will not cost any additional fees.

It is believed that as the ability to process returns and send deposits is improved by the Federal Government, the need for this type of service will be greatly diminished. Improvements in technology and screening software allow for many returns to be processed and approved without ever being looked at by a person. Computerized processing accounts for the majority of the speed that has been added to the time for processing. As further improvements are made, it is expected that the time that is now required will be further reduced.