States crack down on high-interest tax loans.
If you want your tax refund right away this year, be prepared to pay. For years, consumer advocacy groups have warned against so-called "instant" or "same-day" refunds. The reason: these refunds are actually bank loans, and they often bring exorbitant fees. In some cases, that means a mind-boggling 1,300 percent when calculated like a credit-card annual percentage rate.
With tax season under way, advocates are once again warning consumers against them and state officials are pressing for better disclosure on the part of tax preparers.
In mid-February, the Alabama state senate voted 25 to 0 to create the Alabama Board of Individual Tax Preparers, which would require commercial tax companies to disclose costs on the arrangements underlying instant refunds as well have their preparers pass a test.
Before that, New Jersey cited 38 companies for false advertising in connection with "same-day refund" postings purporting to offer instant IRS refunds – which are actually high-interest loans.
Michigan lawmakers are also readying a bill that would force disclosure of interest rates and fees.