Mark Winston Griffith
Holiday and Pay Stub Loans: ‘Tis the Season to be Weary
This past week the Consumer Federation of America and the National Consumer Law Center jointly issued a report that detailed "holiday" and "pay stub" refund anticipation loans (RALs), the freakish products of an updated effort by the nation's largest tax preparers and their partnering banks to suck money from the working poor. This report coincides with efforts by major financial justice organizations from across the country - California Reinvestment Coalition, Chicago's Woodstock Institute, Community Reinvestment Association of North Carolina, and my organization, the Neighborhood Economic Development Advocacy Project - to bring attention to this stunningly creepy product line.
It used to be that RALs, triple-digit APR loans that are collateralized by a tax payers tax refund, were calculated using your W-2 form, which means most were being made in late January and February.
Ah, the good old days!
But now eager to capitalize on the financial desperation that often usually accompanies people during the holiday season - not to mention the post shopmatic stress that follows - the good people of Jackson Hewitt and H & R Block, perhaps soon to be followed by Liberty Tax Services and countless independent operators, have developed products that calculate a RAL using a person's pay stub. These pay stub RALs are available in November, December and early January, long before employers have made W-2s available. Perhaps the scariest aspect of these loans is that they are essentially made without verifying whether the borrower even has the means to pay it back.
Packaged with transparently exploitative marketing devises like HELP (Holiday Express Loan Program) and noxious tag lines promising quick money, these loans join a growing variety of RALs that end up in the hands of a quarter of low-income Earned Income Tax Credits (EITC) recipients in New York. Ho! Ho! Ho!
Strategically, for those of us who are eager to have RALs de-legalized, these new fangled ones only serve to move the target. But make no mistake about it, ALL RALs obliterate New York's usury caps. They should be indiscriminately bundled with the stale egg nog, the moldy Christmas cake and chucked out with all the other holiday garbage.