Consumer Alerts

    Refund Anticipation Loans and Checks Can Cost Consumers


    February 22, 2017

    Some car salesman use high pressure tactics to slither their way into a consumer’s wallet. Car dealerships and other large-item retailers are trying to encourage Arkansans to let their salesmen do the consumer’s taxes. The salesmen can “predict” the tax refund amount and encourage the consumer to enter into a loan with the business to purchase a large ticket item. This is also called a Refund Anticipation Loan and may end up costing the consumer more than filing his or her own return.

    “Refund Anticipation Loans can be risky and costly for consumers,” said Arkansas Attorney General Leslie Rutledge. “The actual refund may only cover a portion of the loan, leaving the consumer on the hook for the rest of the money and often at an inflated interest rate.”

    Attorney General Rutledge released the following considerations before agreeing to have taxes prepared as part of a Refund Anticipation Loan:

    • Free or low-cost options such as the online Internal Revenue Service (IRS) Free File program or the Volunteer Income Tax Assistance may be options.
    • Electronically filed returns can be deposited in bank accounts in as few as eight days.
    • The IRS can also provide refunds by check or prepaid debit card.
    • Always get a written list of fees before entering into any agreement or requesting tax preparation assistance.

    Refund Anticipation Checks are similar to Refund Anticipation Loans and can be attractive to some consumers because businesses often waive tax preparation fees, but many Arkansans can obtain free tax preparation services. The IRS provides a Free File program online that is a federal tax preparation and electronic filing program for approximately 70 percent of taxpayers who earn less than $64,000. Eligible consumers can go to IRS.gov and choose from multiple private companies that will file federal returns at no charge.

    Some Arkansans may also be eligible to receive free help through the Volunteer Income Tax Assistance program. Meanwhile, seniors can contact AARP to learn more about the tax preparation services they provide.

    For more information and tips to avoid scams and other consumer related issues, contact the Arkansas Attorney General’s office at (800) 482-8982 or consumer@arkansasag.gov or visit ArkansasAG.gov or facebook.com/AGLeslieRutledge.

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