Refund Anticipation Loans -- More Harm than HelpWritten by Drahcir Semaj
If someone offered to give you a loan for $2100 at interest rates of up to 222 percent you’d probably laugh at them and walk away; but, this spring, 1 in 10 Americans will do just that: for privilege of borrowing their own money, over 12 million tax filers will pay interest rates as high as 744 percent to borrow their own money thru refund-anticipation or “rapid refund” loans.Refund anticipation loans are short term, high interest loans that commercial tax preparation services offer to taxpayers as a way for filers to get their tax refunds faster -- typically 1 to 2 days. The loans are secured by filer’s anticipated tax refund and ordinarily last no more than 10 days. Refund anticipation loans are commonly called as predatory lending by consumer rights advocates who say that they cost working poor taxpayers over $500 million a year. According to estimates by Consumer Federation of America and National Consumer Law Center, in 2004, a refund anticipation loan recipient would have paid about $250 to get a $2100 refund loan from a commercial tax preparation chain with interest rates of about 182 percent annual percentage rate (APR). Consumer watchdogs believe that commercial tax preparation services that offer refund-anticipation loans are targeting low income taxpayers and Earned Income Tax Credit (EITC) recipients: IRS data shows that EITC recipients are 55 percent of refund-anticipation loan recipients. “The EITC is meant to give a boost to hard-working, low-income Americans. Tax preparers and banks are eating away value of this program, taking money that could be otherwise used to pay bills or build a nest egg for a home or education,” stated Chi Chi Wu, NCLC staff attorney. The EITC program, nation’s largest anti-poverty program, was enacted in 1975 to help low wage workers. Recipients get a large percentage of their federal withholding refunded to them to help lift them out of poverty. Why would someone pay such high interest rates to borrow their own money when IRS can return their money in as little as 10 days if they file electronically? For many working poor, like Mary Carter, it’s all too common issue of needing money to make ends meet. Carter paid H&R Block $218 out of her $760 refund to get a Rapid Refund loan. ” I needed some money right away," said Mary Carter in an interview with Chicago Reporter. "I've always known it wasn't a good deal because that's too much…, but if you need money, all you see is that money coming back in a day or two that you can use right away.”
| | SYI: Save your IdentityWritten by Roger Sorensen
The warning signs can start innocently enough that you don't even recognize them as being warning signs of impending doom. Perhaps it's a letter from your credit card company about a credit application. It might be a call from your bank inquiring about your application for a line of credit. Do not be fooled into thinking these are innocent mistakes. Large financial companies do not make innocent mistakes anymore when it comes to your credit. As soon as these things start occurring, recognize them for what they might very well be telling you. You have been victim of identity theft and thief is attempting to purchase goods and services, running up large bills and debts only to leave you to pay cost of party. Identity theft is unfortunately all too common, being listed as # 1 consumer complaint with Federal Trade Commission. Nearly seven million people were victimized in 2003, representing an 80% increase over previous year. Even worse, only a small portion of thieves are ever prosecuted, even when police are certain they know who thief is. The reason for that is because most cases require that a witness see suspect filling out a credit application or signing to receive goods in victims' name. What can you do when first signs of identity theft start trickling into your mail box or answering machine? Here are 5 actions you can do in an attempt to minimize impact theft will leave on your own good name. Step 1: Damage Control. You have to start doing Damage Control at very first sign that you might have been victim of identity theft. As soon as you receive notice about credit applications you know you have not inquired about, notify local police and file a report that you believe your identity has been stolen. If your purse was lost or stolen, you should have done this immediately. Get that report on file because it is important to have documentation if there is to be even a small chance your impersonator will be prosecuted. After police report, you need to contact three major credit reporting agencies (CRAs) and Federal Trade Commission. The box below gives you necessary information. Federal Trade Commission (877) ID-THEFT TransUnion - Fraud Victim Assistance POB 6970 Fullerton, CA 92834 (800)-680-7289 www.transunion.com Equifax - Consumer Fraud Division POB 740256 Atlanta, GA 30374 (800) 525-6285 www.equifax.com Experian - Consumer Assistance POB 2002 Allen, TX 75013 (888) 397-3742 www.experian.com By contacting them about false credit applications being made in your name, you will activate fraud alerts on your credit file. This is supposed to prompt lenders to inform you of any new requests for credit, giving you a chance to explain it was an identity thief, not you. Sometimes this works. Sometimes it does not and credit company goes ahead and gives thief credit in your name. You should check your credit reports from each of three bureaus to look for items that are not of your doing. Even if there is no fraud evident, you will want to be watching your report at least every other month for next six months. If you see signs of unusual activity, or fraud alerts work and you begin to receive calls from lenders, contact lenders and credit extenders and explain it wasn't you. If impersonator visited them in person, ask them for a description. Then move onto: Step 2: Understand that Reality Bites. After you receive second notice of someone seeking credit in your name, or see any unusual activity on your report you need to: A.Re-contact police about this theft B.Call CRAs again to renew your fraud alerts which can expire in 90 days. C.Request copies of your report from each of CRAs. A fraud alert is supposed to notify all three to send you a report without cost, but make three separate requests to make sure you quickly receive each CRA report. If need be, hound them until they hand over what by law they are required to provide you because of your fraud alert. Step 3: Get Busy. Statistically, recovering from identity theft can take more than 600 hours of effort on your part to clear your name. Much of that time will likely be spent in that never-never land of a company's telephone-hold pattern listening to their music selection. Another big chunk of time will be spent explaining and correcting, re-explaining and re-correcting and maybe needing to go over for a third time matters you had though corrected or already explained. For every action you take, you must keep a precise log of action, details are highly important. Just as it was important for you to notify police immediately upon recognizing you were facing identity theft, you must deal with all companies that think you owe them money as soon as you are aware of them. Using a spreadsheet chart with headings like "Company", "Date", "Representative", "Time Spent", and "Response" will help you keep track of whom you talk to, about what and when you spoke. Good record keeping is vital. Whenever you write, send letter certified mail, and staple confirmation receipt with your other records. Another advantage of certified letter is time stamp. Credit reporting agencies are required to respond within 30 days - it's law. That time stamp on envelope, and fact CRA signed for letter improves your chance of a quick response. You need to take as much control of situation as possible. One important part of this step is to take care of yourself, do a weekend getaway once in a while if you want. The thing is to recognize that a sense of helplessness and loss of control is common when going through an identity theft situation. Deal with feelings when they occur, take a break from ordinary routine as needed, try to relax on occasion and not let situation run away with you. Creditors are likely to start hounding you, demanding payment for goods you never bought. Your assertive actions, such as placing fraud alerts with CRAs, reporting to police, and keeping track of all contacts with creditors will help you clear your name. It will also help you prove to creditors that you do not owe them money your impersonator stole from them.
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