Each year, millions of dollars are siphoned out of New York’s poorest neighborhoods to pay for tax refund anticipation loans, or RALs. RALs are usurious, short-term loans that flood New York’s low income communities and communities of color at tax time.
Made against a person’s expected tax refund or tax credits, RALs typically carry annual percentage rates ranging from 36% to more than 700% -- well above New York State’s 25% interest rate cap. RALs are arranged at tax prep offices, such as H&R Block, Jackson Hewitt, and countless local tax prep sites. Three banks are responsible for financing more than 90% of RALs made in the U.S.: HSBC; JPMorgan Chase; and Santa Barbara Bank & Trust.
NEDAP is fighting for the elimination of predatory practices that pervade the tax refund anticipation lending (RALs) industry. NEDAP encourages provision of fair and affordable short-term loan products. Our RALs campaign employs the following strategies:
NEDAP participates in direct action to highlight the role of tax preparers that make RALs. NEDAP also challenges banks that finance RALs, through corporate accountability and regulatory advocacy.
Groups gather at the corporate headquarters of Jackson Hewitt Tax Services, in Parsippany,New Jersey, where NEDAP and others call on Jackson Hewitt to reimburse the Working People of America $74.5 million -- the amount of money the company fleeced from taxpayers through high-cost financial products such as RALs in just one tax season.
In January 2007, NEDAP and allies from throughout the country -- California Reinvestment Coalition, Community Reinvestment Association of North Carolina, New Jersey Citizen Action, and Chicago's Woodstock Institute -- traveled to Jackson Hewitt's corporate headquarters to highlight the company's role in brokering RALs. The groups delivered a giant, 5X3 feet check to Jackson Hewitt's CEO, demanding the company to pay back money it siphoned from the Working People of America during the 2005 tax season through its brokering of high-cost financial products such as RALs. Read the press release for this action.
Through Merger Watch, NEDAP has challenged proposed mergers by each of the major RALs lending banks -- HSBC, JPMorgan Chase, and Santa Barbara Bank & Trust. The challenges have helped to publicly highlight the role the banks play in financing abusive tax refund loans. NEDAP filed administrative challenges with the federal banking agencies, based on the banks' RALs RALs financing:
The five by three feet "People's 'rapid refund'" check presented to
Jackson Hewitt President & CEO Michael Lister in January 2007
NEDAP is a founding member and serves on the Steering Committee of New Yorkers for Responsible Lending (NYRL), a state-wide coalition of more than 130 organizations. Ending abusive tax refund anticipation loans is a priority issue for NYRL.
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Affordable alternatives & Free tax preparation
Affordable short-term lending and savings programs are available in New York City through many community development credit unions, including Bethex Federal Credit Union in the Bronx, Brooklyn Cooperative Federal Credit Union, and Lower East Side People's Federal Credit Union.
Free tax preparation services are available through a number of organizations in New York City.
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Research and documentation
NEDAP's extensive research on tax refund lending has included analysis of Internal Revenue Service data, the scouring of corporate filings with the Securities and Exchange Commission, utilization of US Census information, and detailed legislative and regulatory research at the city, state and federal levels.
Recent research on tax refund lending has found that:
- From 2002-2005, $324 million was siphoned from New York City's communities;
- One zip code in Brownsville, Brooklyn was hit with nearly $8.6 million in fees between 2002 and 2005;
- In 2005 alone, the most recent year for which data is available, more than $75 million was drained from NYC communities; and,
- New York City communities hit hardest by tax refund lending are those communities over 50% Black or Hispanic, including the South Bronx, Central and North Brooklyn, and Southeast Queens.
Training community groups, Assisting individuals
NEDAP conducts tailored trainings for, and provides technical assistance to, community organizations on community economic justice issues, including tax refund anticipation lending. Through the Annual Community Reinvestment Workshop Series, NEDAP brings together community groups, organizers and advocates to learn about critical community reinvestment and financial justice topics. NEDAP keeps groups informed about RALs and their impact on EITC recipients and communities of color, in several workshop sessions, including "The High Cost of Credit in Low Income Neighborhoods."
NEDAP's Community Financial Literacy and Justice Curriculum, taught to thousands of New Yorkers each year, includes detailed information on RALs and offers sound alternatives.
Below, you will find NEDAP research and documentation regarding tax refund anticipation loans. Documentation includes GIS mapping, reports, comment letters to regulatory and legislative bodies, and fact sheets and alerts for community groups and advocates.
Through its Financial Justice Mapping Project, NEDAP
provides geographic information systems (GIS) mapping support to community groups and coalitions in New York City. NEDAP has prepared maps documenting tax refund loans throughout all of New York State. Below are two samples of the maps NEDAP has prepared, illustrating the prevalence of RALs in New York City.
- MAP: Percent of tax filings with a RAL, by NYC neighborhood, 2002-2005
- MAP: Money drained by RALs fees, by NYC neighborhood, 2002-2005
- Full Report: "Predatory Tax Time Loans Strip $324 Million from New York City's Poorest Communities; An Analysis of Tax Refund Lending in NYC, 2002-2005"
- Full Report: "Rapid Rip-Offs: Tax Refund Anticipation Lending in New York City"
Fact Sheets and Alerts
For additional research and background on tax refund anticipation lending, visit the websites of the National Consumer Law Center and the Consumer Federation of America.
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To raise public awareness regarding the abusive practices of tax refund anticipation lending, NEDAP has led and participated in numerous press events, as well as conducted extensive outreach to the press.
As a matter of public education, NEDAP has produced segments for its monthly cable show, "On the Money with NEDAP," discussing the predatory nature of tax refund lending including, Rapid Refund, Rapid Ripoff and Tax Time Issues: Tax Refund Loans. Co-director Mark Winston Griffith has also written extensively about tax refund lending through his fellowship at the Drum Major Institute.
You can explore NEDAP's extensive advocacy through the media in NEDAP's Press Room. Below, find a brief sampling of the press coverage NEDAP has generated regarding abusive tax refund lending.
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