November 22, 2024

Bucks Blog: After This Year, No More Tax Refund Loans

Bloomberg News

This is the last tax season that any banks will be offering “refund anticipation loans,” according to the National Consumer Law Center.  The loans, called R.A.L.’s in the industry, are short term, repaid with a borrower’s income tax refund. Typically, the loans carried fat fees and were marketed through tax-preparation outlets to lower-income borrowers who wanted fast cash.

Recent action by federal regulators means that just one bank, the Republic Bank Trust Company of Louisville, Ky., is offering the loans this tax season. But it won’t be doing so next year, under a settlement with the Federal Deposit Insurance Corporation. (It’s possible that some smaller payday lenders, which until recently haven’t had much federal oversight, may still offer some version of the loans.) This year, according to the consumer law center, filers who get a $1,500 refund anticipation loan from Republic through the Jackson Hewitt tax preparation chain will pay at least $61.22, which translates into an annual percentage rate of 149 percent. Jackson Hewitt didn’t immediately respond to a request for comment.

An estimated five million people received the loans in the 2010 tax filing season, according to the National Consumer Law Center. But there are cheaper or even free ways for tax filers to get the cash expected from their refunds relatively quickly, said Chi Chi Wu, a staff lawyer at the center.

If you have a bank account and file your tax return electronically, you can have your refund deposited automatically in two weeks or less.

If you lack a bank account, you can still file electronically and get the refund quickly on a prepaid card — including a payroll or other card that you may already have.

(The Internal Revenue Service sponsors free tax preparation and, in many cases, free electronic filing for low-income and elderly filers, through its Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs. The AARP Foundation also sponsors free tax preparation services. And there’s also free help for many filers on the I.R.S.Web site.)

Unbanked customers may also consider a “refund anticipation check,” — but only if it’s free, Ms. Wu said. HR Block, which stopped offering the refund anticipation loans last year, is offering free refund anticipation checks until Feb. 4, if customers get their refunds on Block’s prepaid Emerald Card. HR Block didn’t immediately respond to a request for comment.

The checks are aimed at letting customers avoid paying upfront for their tax preparation. The check isn’t a loan. Rather, a bank sets up a temporary account to receive the refund from the I.R.S. Then, the bank issues the customer a check or prepaid card — minus the tax preparation fee, and any other fees — and closes the account. Banks usually charge around $30 for the checks, the consumer law center says.

While prepaid cards can be a good option for those without bank accounts, Ms. Wu notes that they can carry significant fees, too, so consumers must make sure they know the costs involved with using a particular card.

Have you ever used a refund anticipation loan, or a refund anticipation check? How much did it cost you?

Article source: http://feeds.nytimes.com/click.phdo?i=1564bae085089ea48e847fb825e3233d

The Big Picture: Local Laws Fighting Fat Under Siege

In some cases, lawmakers are responding to complaints from business owners who are weary of playing whack-a-mole with varying regulations from one city to the next. Legislators have decided to sponsor state laws to designate authority for the rules that individual restaurants have to live by.

Florida and Alabama recently adopted such limits, while Georgia, Tennessee and Utah have older statutes on their books. Earlier this year, Arizona prohibited local governments from forbidding the marketing of fast food using “consumer incentives” like toys.

And this week, Ohio Gov. John Kasich signed the state budget, which contains sweeping limitations on local government control over restaurants.

“All of sudden we’re seeing this legislation get slipped into pending bills at the 11th hour under the radar of public health advocates, which will pre-empt local governments from adopting policies that would improve health in their communities,” said Samantha Graff, senior staff lawyer at Public Health Law Policy, a nonprofit group that works to combat obesity, among other issues.

The new state laws will have no effect on a federal law that requires menu labeling by chains with 20 or more restaurants by 2013. But more than half of the nation’s restaurants will not be required to meet the federal rules for listing calories and fat content.

Sue Hensley, a spokeswoman for the National Restaurant Association, said it supported the efforts of its state members to protect restaurants from what she described as “a patchwork of regulation.”

“We feel it is in the best interests of the consumer to have one uniform standard,” Ms. Hensley said.

Public health advocates worry that the new laws will stall a movement among cities and counties that are putting in place a wide range of policies and tools aimed at stemming the rising tide of obesity among their residents. The mayor of Oklahoma City, Mick Cornett, for example, has challenged its citizens to lose a million pounds collectively, and cities around the country have worked to ensure that more nutritious meals are served at schools.

Towns and cities like Louisville, Ky., often serve as laboratories where new policies can be tested and tweaked, to develop public support that then unfolds across states and even nationally. The federal law passed last December that will set nutritional standards for food sold or otherwise provided in schools nationally is one example: Requirements for healthier foods in school cafeterias began in local school districts.

“This battle will involve policy changes at all levels of government, but it is easier fought locally because it allows greater accountability to ensure implementation and addresses the unique needs of communities,” William H. Roach Jr., chairman of the American Heart Association, wrote in an e-mail.

Margo G. Wootan, director of nutrition policy at the Center for Science in the Public Interest, a nonprofit research and advocacy group, said state restaurant groups were leading the recent pushes for state legislation that pre-empted local governments. “Politicians go out to eat a lot, so restaurant owners know their state lawmakers very well,” Ms. Wootan said. “They’re quite formidable opponents.”

State legislators who have sponsored pre-emptive legislation in Florida and Alabama say they were contacted by their state’s restaurant associations, which expressed concern that California’s latest food rules would be adopted by their own local governments.

For example, the Los Angeles City Council banned fast food restaurants in South Los Angeles, where rates of poverty and obesity are high. In April, the Santa Clara County supervisors adopted a policy that forbids fast food restaurants from selling meals with toys, like those connected with movie promotions.

“We didn’t want to give those kinds of things a chance to become a problem for the restaurant industry here,” said Steve Crisafulli, the Florida state representative who sponsored the law limiting local authorities’ ability to regulate restaurants in their jurisdiction. “It’s always easier to take care of these things before they become an issue rather than after the fact.”

Article source: http://feeds.nytimes.com/click.phdo?i=55244ff9a282f88f2687a1ff40cf7c84

Most States Seen Raising Jobless Tax on Businesses

Unemployment taxes remain low by historical standards: the survey, by the National Association of State Workforce Agencies, found that states have effectively cut the unemployment tax rate on businesses by 64 percent since the unemployment program began collecting taxes from employers in 1938.

The stubbornly high unemployment that has upended the lives of millions of Americans has also depleted the unemployment trust funds of most states: 32 of them owe the federal government more than $48.3 billion that they borrowed to continue paying jobless benefits.

Unless Congress acts, that money will have to be repaid — with interest. The survey found that seven states were thinking about borrowing from the private sector to repay the loans.

Some analysts say that states kept unemployment taxes too low during boom years, so their trust funds were ill-prepared to weather the downturn. Now states find themselves forced to raise taxes on employers just as they need them to create jobs, and to consider cutting benefits while huge numbers of people are relying on them to survive.

Richard A. Hobbie, the executive director of the association of work force agencies, said the survey found that states would collect an average of 16.5 percent more in unemployment insurance taxes this year than they did last year.

The survey did not measure reductions to benefits. Michigan recently decided to pay only 20 weeks of jobless benefits, down from the 26 weeks that most states pay, and other states are following its lead. (The federal government pays for extended benefits after the state benefits run out.) Other states are capping or reducing the amount of money they pay in benefits.

George Wentworth, a senior staff lawyer for the National Employment Law Project, said an unusually large number of states were contemplating benefit cuts. “A number of state legislatures are looking at reducing benefits as one of the ways to try to restore solvency, even though in most states it’s not going to get you there,” he said. “It really erodes the stimulus aspect of the program, and it undermines its purpose, which is to provide workers with a partial wage replacement that they can manage on until they find another job.”

Article source: http://feeds.nytimes.com/click.phdo?i=7dc745d0a691b3e00c173b1da544dc88