RSSBanks’ “refund anticipation loans” will be history as of April 30.
According to Reuters, more than 12 million taxpayers got loans in 2004, at their peak. Typically borrowers received their tax refund money 10 days earlier, at subprime rates – and one of the biggest players in the market was JPMorgan Chase. The bank provided about 1.5 million such loans annually through about 13,000 independent preparers.
Chase left the refund anticipation loan business in April 2010, citing increased regulatory scrutiny.
In 2010, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. began a significant crack-down on banks providing such loans. However, Wells Fargo and other national banks have since introduced other, checking account “advance” products. In response to pressure from consumer groups, the Consumer Financial Protection Bureau has indicated that it will not allow bank payday loans – and advance loans could come under this category.
Consumer groups say that tax refund loans disproportionately targeted the poor and minorities. African American tax filers, for example, are 3.5 times more likely to use these high-cost loans, according to the Woodstock Institute.
