| Releases
& Statements
FOR
IMMEDIATE RELEASE March 13, 2007
Contact: John Collins, Press Secretary
(212) 669-4193
Release #: 001-2007
Click
here to view the annual tax guide
Gotbaum:
Beware of Tax Refund Loan Scams
- Releases annual tax guide to help New Yorkers save money -
HARLEM
- Public Advocate Betsy Gotbaum today cautioned New Yorkers to
steer clear of unscrupulous commercial tax preparers that offer
costly “instant refunds.” The loans, known as Refund
Anticipation Loans (RALs), can cost New Yorkers hundreds of dollars
in fees and carry exorbitant interest rates of as much as 700
percent.
Donna
A. Lawrence from Children’s Defense Fund (CDF) and PJ Kim
from FoodChange joined Public Advocate Gotbaum in Harlem to release
her annual tax guide to help working families find free tax assistance
and save money.
Public
Advocate Gotbaum said, “H&R Block, Jackson Hewitt, a
host of other tax preparers, all claim to offer an ‘instant
refund’, but it’s a bad deal – any way you cut
it. What they are really offering is an expensive, high-interest
loan that can cost working families hundreds of dollars. New Yorkers
need to know that free and low-cost tax assistance is available
and that they can save money simply by walking into one of the
free tax preparation sites throughout the City.”
"Most
recent data show that statewide, one in four EITC families purchased
a Refund Anticipation Loan,” said Donna A. Lawrence, Executive
Director of the CDF–New York. “At an average fee of
$100, EITC recipients in New York lost $34 million of their hard-earned
money to high-interest RALs. Instead of lining the pockets of
corporate interests, that $34 million could have helped families
of modest means cover rent, utility bills, health insurance, and
child care costs."
RALs
are a confusing refund option. In fact, a survey by the National
Consumer Law Center and Consumer Federation of America found that
some 70 percent of RAL recipients did not realize they had taken
out a loan. Public Advocate Gotbaum said it was no accident that
the majority of this money came out of the pockets of low-income
New Yorkers.
Public
Advocate Gotbaum said tax preparers use misleading advertising
to market the RALs aggressively to less affluent neighborhoods;
low- and moderate-income New Yorkers are eligible for EITC, a
refundable federal, state and city tax credit. By applying for
all three credits, a city taxpayer can receive a refund of up
to about $6,000. The greater the EITC refund, the larger the RAL
finance fee that a tax preparer collects.
"Abusive
tax refund anticipation loans are part of a growing array of short-term,
high-cost products -- such as payday loans, rent-to-own stores,
bounce protection and high-cost credit cards -- that prey on low
income working people and their neighborhoods. Our research has
shown that from 2002 through 2005 more than $324 million was siphoned
from New York City's neighborhoods through abusive tax refund
loans," said Chris Keelly of the Neighborhood Economic Development
Advocacy Project.
The
Public Advocate’s website—www.pubadvocate.nyc.gov—once
again features the most comprehensive list assembled of over 180
free tax preparation sites, as well as information about Earned
Income Tax Credit eligibility and other resources.
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