Better Business Bureau Warns About Hidden Fees During Tax Season

By: Bryan Anderson Email
By: Bryan Anderson Email

MARIANNA, FL 2/1/2012 --

The Better Business Bureau is warning you about some businesses that take advantage of people at tax time. The problems stem from what are called refund anticipation loans. Many come with hidden fees and extremely high interest rates.

Alford resident Rebecca Butler has car troubles and three kids to take care of. She said Tuesday she needs money now, so she chose to apply for a refund anticipation loan at Lora's Tax Service in Marianna.

"The quicker the better," said Butler.

And Butler's not alone.

"How many would you say do refund anticipation loans?," asked WCTV's Bryan Anderson.

"I actually was looking at my numbers yesterday and out of probably four to five hundred last year but only about two hundred and eighty to three hundred received them," said Lora's Tax Service Owner Lora Degagne.

So what are the fees involved? At Lora's Tax Service, you can expect to pay up to $140 just for your taxes to be prepared, then for a $1,500 anticipation loan, an automatic $29.95, and if you're approved, they tack on an additional $61.22. That's an annual percentage rate, or APR, of 142.14%.

"The reason that sounds so high is because you're only giving this loan for a very short period of time," said Degagne.

The Better Business Bureau said it's too risky because an RAL is just that, an anticipated refund. What you actually get may be lower than the loan, putting you even farther behind. But Butler and many others still take the risk, saying they can't wait.

"It helps out tremendously," said Butler.

The BBB reports some businesses can charge interest rates and fees as high as 700% of your actual return. It recommends filing electronically and choosing the direct deposit option, which takes about fourteen days.

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  • by Anonymous on Feb 1, 2012 at 09:57 AM
    Yes the fees are high, and I don't think is is a scam. people realize that direct deposit of refunds only take 14 days on average, but they decide they need the money RIGHT NOW. These companies are just providing a service for the impatient, and it is no different than a convenience store or a restaurant providing a service for a higher fee than if you were to prepare a meal yourself or buying the product from another location.
  • by Betty on Feb 1, 2012 at 07:05 AM
    Why pay all those fees. Call 211 for free tax preparation. Refund can be deposited in 7 days.
  • by Jim Location: Gadsden County on Feb 1, 2012 at 05:56 AM
    A business that helps people in a hole dig it deeper. What a sad way to make money.
    • reply
      by Matt on Feb 1, 2012 at 08:28 AM in reply to Jim
      Low-income individuals can frequently get free tax assistance, and I can get my not-too-complex taxes done for about $70. Dave Ramsey said it best. He called himself a "free-market guy", then referred to payday lending as usury, and said "good riddance" in response to a state placing an APR limit on loans, essentially shuttering payday lenders.
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