BBB warns taxpayers of Refund Anticipation Loans

February 17, 2009
Tax season is here and many Americans are looking forward to receiving a large check from Uncle Sam this year. However, taxpayers are growing impatient in the process, especially in a point when our country is facing tough economic times. Many Americans are turning to their tax preparers who offer Refund Anticipation Loans (RAL) – essentially an advance for the amount of your refund. While RALs might be a good source of instant cash, BBB warns that they come at a high cost.
RALs are short-term, high-interest loans granted by some tax preparers. The loan is repaid when the consumer’s refund is received from the IRS. The National Consumer Law Center (NCLC) found that the effective annualized rate for a RAL can range from about 50 percent to nearly 500 percent.
“Refund Anticipation Loans are more prevalent now than ever,” said Norman Wright, president and CEO of your BBB. “What’s troubling about these loans is that they accrue extremely high interest rates and lenders often fail to disclose terms and conditions of the agreement, including no restrictions on interest rates.”
Before agreeing to an instant refund, the BBB offers the following options and advice:
  • Consider e-File and Direct Deposit: It’s the fastest and most secure way for consumers to receive refunds; taxpayers can have their money in as little as 8 to 15 days.
  • Don’t fall for the “convenient” debit card: These cards are another way for tax preparers to make money. The debit card often includes hidden fees and some have limits on how much money you can access at one time.
  • Finance purchases other ways: If consumers are looking to purchase specific high-priced items with their refunds, BBB encourages financing options other than RALs, such as store credit promotions and offers.
  • If you must, then shop around: If necessary to have a refund immediately, BBB suggests consumers shop around and look for good deals. Fees and RALs vary by tax preparer. Consumers can check out tax preparer’s record of integrity and performance free-of-charge with BBB Reliability ReportsTM, available online at
For additional information and advice you can trust, start with