FOR IMMEDIATE RELEASE
PR- 106-03
April 28, 2003
MAYOR MICHAEL R. BLOOMBERG SIGNS LEGISLATION REQUIRING DISCLOSURE FOR "REFUND ANTICIPATION LOANS"
Remarks by Mayor Bloomberg at a Public Hearing on Local Law
"The bill before me today is Introductory Number 383-A, sponsored by Council Members Reyna, Reed, Gioia, Brewer, Davis, Dilan, Fidler, Foster, Jackson, Koppell, Liu, Martinez, Monserrate, Nelson, Quinn, Stewart, Yassky, and Weprin. The bill will require tax preparers to disclose to their customers the fees associated with refund anticipation loans.
"Refund anticipation loans have often been incorrectly described as rapid refunds, or instant money, by tax preparers in their advertisements. In reality, refund anticipation loans are actually high-interest, short-term loans whose annual percentage rate can exceed 600%. Consumers rarely understand the complicated arrangements to which they agree in order to receive, not their tax refunds, but the proceeds of high interest loans. Even fewer realize how much the interest charges, loan costs, and related fees will reduce the tax refunds they expected from the government. The disclosure requirements of this bill will ensure that consumers are informed about the costs associated with refund anticipation loans.
"Refund anticipation loans came to the attention of the Department of Consumer Affairs when these loans appeared in advertisements claiming a taxpayer could obtain a rapid tax refund in three to four days using the tax preparer’s services. To arrange a tax refund anticipation loan, the tax preparer and a bank establish a high-fee checking account to receive the actual tax refund from the government. When the tax refund is deposited, the refund anticipation loan is repaid, including interest charges and bank fees, and the tax preparer is paid its tax preparation fees and other service charges.
"This bill will require the tax preparer to provide the customer with specific information about the costs, fees, and annual percentage rate for the refund anticipation loan. The tax preparer will also be required to alert the taxpayer to the fact that tax refunds may be obtained directly and expeditiously from the government. The consumer will be able to make an informed decision about the loan when he or she compares the tax refund to the costs of the refund anticipation loan and sees how much the tax refund will be reduced by those costs.
"This bill will protect consumers and ensure that they are provided with accurate information in order to make informed decisions regarding their tax refunds."
CONTACT:
Jordan Barowitz / Jerry Russo (212) 788-2958
