Tuesday, February 20, 2007
Tax Season's Rapid Ripoff in the 'Hood
With tax season upon us, here's an interesting article I spotted in the AM New York free paper from a couple weeks ago:
Those 'rapid refunds' offered by many tax preparation firms leading up to April 15 are draining millions of dollars from the poorest neighborhoods with loans that have interest rates as high as 700%, advocates warned Sunday.Click here to read the rest of the article.
City residents who take the usurious loans hoping to get a quicker refund have spent more than $324 million in fees and interest over a three-year period, according to the Neighborhood economic Development Advocacy project.
Residents of Brownsville in Brooklyn shelled out more than $8.5 million in fees from 2002 to
2005 alone.
Billed as rapid refunds among other names, the refund anticipation loans or RALs, are issued by out-of-state banks that charge interest rates that exceed the New York's 25% interest ceiling on loans -- with some going as high as 700%.
Other fees and charges hidden inside these further whittle away at taxpayers' refund checks. The loans are marketed aggressively in low-income communities, advocates said.
"When advocates mapped out the amount of money lost to these loans by zip code, they found that the highest amounts where being in paid in communities comprised largely of minorities and the working poor. Often the taxpayers were eligible for Earned Income Tax Credits, but saw that federal money go toward fees instead of their families, Keeley said.
"The areas with the most amount of fees siphoned away match almost identically to the areas that are more than 50% Black or Hispanic -- that's staggering," Keeley said.
Labels: AM New York, Michael Clancy, Rapid Refunds
