A Volunteer Solution to Predatory Tax Refund Loans

This City of Austin press release calls for volunteers to sign up here to provide  free tax preparation and simultaneously solve a problem with a different type of predatory loan offered by commercial tax preparers. The industry's name for these loans is refund anticipation loans. The interest rates are sometimes in the triple digits, and the fees are also high. For example, until the end of 2010 H&R Block and HSBC contracted to provide these loans, then in 2011 H&R Block offset the loss of income from the contract by raising fees on what the industry calls refund anticipation checks. You can read the details of the federal class action lawsuit that arose from these practices in Matt Reynolds' article, H&R Block Accused of Preying on Poor.

The Community Tax Centers mentioned in the CoA press release arose from the Volunteer Income Tax Assistance program initiated by the IRS. Many of the tax refunds are due to the work performed by families which are eligible for the Earned Income Tax Credit. Susan Combs, Texas State Comptroller, stated “Last year [2009], more than 2.3 million Texans claimed the credit and received more than $5.3 billion in EITC refunds. That’s an average of $2,313 per qualifying household, bringing financial relief to families and a boost to the Texas economy.” RAISE Texas reported:

In 2010, community tax center programs in Texas prepared over 93,200 returns resulting in over $72 million in Earned Income Tax Credits, over $37 million in Child Tax Credits, over 3.1 million in Education Tax Credits, and over $142 million in refunds to hard working families. These free tax preparation services also saved participants over $10 million in fees that tax preparers would charge them for their services. There are over 200 VITA sites in Texas, located in over 40 counties throughout the state. In order to reach more Texans, community tax centers need support from public and private entities.

In Austin, this support is provided by Foundation Communities.