The Internal Revenue Service just announced it will no longer make certain information available to banks, which will make it riskier for them to make fund anticipation loans.
These are short-term loans that allow someone to get an advance on their tax refund. The fees are high and consumer advocates have fought long and hard against RALs.
The IRS says it will stop making the debt indicator available during next year’s filing season.
“We no longer see a need for the debt indicator in a world where we can process a tax return and deliver a refund in 10 days,” IRS Commissioner Doug Shulman said in a statement.
“Refund Anticipation Loans are often targeted at lower-income taxpayers,” he added. “With e-file and direct deposit, these taxpayers now have other ways to quickly access their cash.”
Liberty Tax Service CEO and Founder John Hewitt reacted strongly to the IRS announcement today that the debt indicator will be discontinued.
"It's a disappointing decision for consumers. The demand for Refund Anticipation Loans is customer-driven. We are emerging from the greatest financial downturn since the Great Depression. This really isn't the time to take financial options away from those who choose them, and more importantly need them ," said Hewitt from his corporate headquarters in Virginia Beach, Virginia.
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