The plethora of tax-time financial products aimed at lower- and moderate-income Americans can be mind-boggling. Adding to the complexity, there’s even some disagreement over what they should be called.

Earlier this week, I wrote about a report from the National Consumer Law Center, which outlined new alternatives to tax-refund-anticipation loans — high-cost, short-term loans made to consumers who pay them back when they get their income tax refunds. Such loans are much less prevalent now, in part because of a federal crackdown on banks that made many of the loans.

But the center’s report noted that some tax preparers are offering new twists on the loans using nonbank partners, and included the tax preparation firm Jackson Hewitt on its list. But a Jackson Hewitt representative got in touch by e-mail to say that the company is not, in fact, offering refund-anticipation loans this tax season.

“We are committed to full client disclosure regarding all fees and charges associated with all tax-related financial products,” Alan Varnson, vice president for customer acquisition for Jackson Hewitt Tax Service, said in an e-mail.

Earlier this year, though, Jackson Hewitt began offering a line of credit of up to $1,000, called SmartLine, that may be used as an advance on a tax refund. SmartLine is offered through Jackson Hewitt by an outside company, called BillFloat.

In a follow-up e-mail, a Jackson Hewitt representative defined a refund-anticipation loan as a loan “provided by a bank to an approved applicant that was secured by their anticipated tax refund.”

The SmartLine product, it said, is a line of credit, “not to be confused with a loan on an anticipated tax refund amount,” adding, “It has no connection with the applicant’s tax refund and is open to any BillFloat applicant throughout the year.”

But Jackson Hewitt’s own Facebook site makes a link between tax season and the line of credit. “By coming to our office and allowing us to prepare your tax return, you will have the opportunity to provide certain tax return information to BillFloat,” says a question and answer on the Facebook site. “This information will help verify your identity and ability to repay.”

Chi Chi Wu, a staff attorney at the consumer law center, called the difference “a matter of semantics.”

SmartLine does carry significant fees. BillFloat charges a monthly fee of $6.25; plus a fee of 3 percent or $10, whichever is greater, each time the consumer accesses the line; as well as periodic interest of 35 percent. So if a consumer has the line of credit for two months and draws $500 from it at one time, the cost is $38.75, the law center says. That equates to an annual percentage rate of 93 percent for a comparable “closed end” loan, the law center calculates.

Article source: http://bucks.blogs.nytimes.com/2013/03/28/tax-time-refund-loans-vs-lines-of-credit/?partner=rss&emc=rss