Cordray Alerts Ohioans to Instant Tax Return Schemes

(COLUMBUS, Ohio) With tax return season upon us, some tax preparation companies, payday lenders and even car dealers advertise tax refund products as "fast cash refunds" or "instant refunds." Ohio Attorney General Richard Cordray today warns that, unfortunately, the only "fast" things about many of these "refunds" are the fees that go with them, often turning what would have been extra cash into a high-interest loan.

Commonly referred to as refund anticipation loans or RALs, these products sound good but can be very costly. The loans are provided by companies based on a consumer's expected tax return. The companies then charge filing fees, tax preparation fees and interest that can eat up 25-percent of a consumer's tax refund. If the tax refund winds up smaller than anticipated, the consumer will have to pay the difference in addition to the fees.

"These operations are gouging Ohioans out of hard-earned money," said Cordray. "It is imperative that consumers protect themselves. Read the fine print and research alternative assistance options."

To avoid the scam, Cordray advises consumers to file their own tax returns electronically for free and have the refund directly deposited in a bank account. The average turnaround time is two weeks for refunds. He also reminds Ohioans that they may be eligible for the Earned Income Tax Credit (EITC) and can get free help in filing tax returns if they make approximately $49,000 and below.

Cordray asks Ohioans to report any unfair or deceptive practices by these operations that may include:

Advertising RALs but failing to clearly disclose that they are loans, not early refunds.

Failing to explain that when a consumer takes out a RAL, the IRS will send the tax refund to the RAL provider, not to the consumer.

In advertisements, failing to make clear that by taking out a RAL, the taxpayer is borrowing against the expected refund, not obtaining the refund itself.

Failing to inform consumers that RALs are interest-bearing loans and not a quicker way to receive their refunds from the IRS.

Charging fees as a percentage rather than as a flat rate.

Failing to advise consumers that they may be liable to the lender for additional payment, interest and other fees (as applicable through the RAL) if the refund is delayed or is smaller than anticipated.


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