New Jersey 101.5 FM Radio

Consumer Group Wants To Stop Tax Refund Loans

New Jersey 101.5 FM Radio — Wednesday, January 17, 2007

By Martin Di Caro

Some people don't want to wait, even a week, for their tax refund. There are several companies competing for their business by offering to give them their tax refund the day they're done preparing their tax forms. Essentially, it's a loan. You get your refund upfront, and slowly pay it back along with several fees and high interest rates. Consumer rights activists say financial services companies like Parsippany-based Jackson Hewitt are using predatory lending practices to scam low-income workers out of their income tax refunds by luring them into taking these loans. On Tuesday, members of several watchdog groups gathered outside Jackson Hewitt's offices in a failed attempt to demand the company's CEO end the practice.

"Too many low income families are being scammed and being taken advantage of," said Phyllis Salowe-Kaye, the executive director of Citizen Action, a consumer rights group. "They are being lured in by massive marketing and commercials that are on major network television, urging them to come and get their money fast. We have sent letters to both the attorney general and public advocate, asking them to investigate Jackson Hewitt.

New Jersey state law limits the interest rate a banks may charge on a loan to 30 percent. However, because the "tax refund loans" are financed by out-of-state national banks, state regulations do not apply and customers are often charged significantly higher. One activist who protested on Tuesday said interest rates range from 40% to 700% annually.

A spokesman for the New Jersey Department of Banking and Insurance told Millennium Radio federal regulations govern these loans, so the state would not be able to enforce jurisdiction. However, attorneys general in other states have filed lawsuits to end the practice, asserting that any bank must abide by a state's consumer protection laws. The spokesman said that would be a question for New Jersey's attorney general.

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