[Added 12-20-2005 by L.L. No. 8-2005]
A.
In the execution of this article it has been found
that tax preparers and other persons are increasingly offering consumers
"instant refunds," which essentially allow consumers to obtain what
purports to be the proceeds of the consumers' anticipated tax refund
on an expedited basis. Tax preparers and others who offer such instant
refunds often do not disclose complete and accurate information to
consumers concerning these financial transactions. The characterization
of these financial transactions as instant refunds is misleading in
that these transactions are instead loans or non-loan-type bank products
payable against the consumer's tax refund, which accrues interest,
fees and administrative costs. Consumers are often not aware that
an instant refund being offered by the tax preparers and other persons
is, in fact, a loan and/or a non-loan-type bank product and that the
consumer will be charged substantial fees and interest. Additionally,
many consumers are under the impression that they are not liable for
the full amount of the loan if they do not receive all or part of
their tax refund from the IRS.
B.
It has been found that refund anticipation loans (RALs)
drain billions of dollars from the pockets of American consumers.
Tax preparers and facilitators of these transactions often target
working poor who receive the earned income tax credit. These loans
cost American workers $1.14 billion in loan fees in 2002, plus an
additional $406 million in other fees [Chi Chi Wu and Jean Ann Fox,
"Quick Tax Loans Drain Over a Billion from American Worker," National
Consumer Law Center and Consumer Federation of America, January 29,
2004].
C.
The Board of Trustees seeks to provide consumers with
certain protections, to require complete disclosure about these transactions,
and to provide a private right of action to recover against those
tax preparers, facilitators, and others who violate this article.
A.
This article shall be known and cited as the "Refund
Anticipation Loan Disclosure Law." This article shall be liberally
construed to effectuate its purpose. The purpose of this article is
to protect consumers who enter into RAL and refund anticipation check
(RAC) transactions and to require tax preparers, facilitators, and
other persons who offer or facilitate such loans to completely disclose
all fees and charges for RALs and RACs facilitated or processed in
this Village.
B.
No person (including any tax preparers, facilitators,
and any other person) may individually or in conjunction or cooperation
with another person solicit the execution of, process, receive, or
accept an application or agreement for an RAL and/or refund anticipation
check (RAC), or in any other manner facilitate the making of an RAL
and/or RAC unless the person has complied with the provisions of this
article.
As used in this article, the following terms
shall have the meanings indicated:
Any natural person who, individually or jointly with another
consumer, is solicited to apply for, applies for, or receives the
proceeds of an RAL or RAC.
Any person who makes an RAL or who takes an assignment of
an RAL.
A person who individually or in conjunction or cooperation
with another person solicits the execution of, processes, receives,
or accepts an application or agreement for an RAL and/or RAC or in
any other manner substantially assists in the making of an RAL and/or
RAC.
An individual, firm, partnership, association, corporation
or another entity.
A check or other payment mechanism:
Representing the proceeds of the consumers tax
refund;
That is not a loan;
That was issued by a depository institution
or other person which or who has or will have received a direct deposit
of the consumer's tax refund from the Internal Revenue Service; and
For which the consumer has paid a fee or other
consideration for such payment mechanism,
A loan that is secured by and that the creditor arranged
to be repaid directly or indirectly from the proceeds of the consumer's
income tax refund and includes the payment of interest and/or RAL
fees by the consumer. An RAL shall also include any sale, assignment,
or purchase of a consumer's tax refund at a discount or for a fee,
whether the consumer is required to repay the buyer or the assignee
if the Internal Revenue Service denies or reduces the consumer's tax
refund.
The charge, fee, or other consideration charged or imposed
directly or indirectly by the tax preparer or facilitator for the
making of or in connection with an RAL. This term includes any charge,
fee, or other consideration for a deposit account, if the deposit
account is used for receipt of the consumer's tax refund to repay
the amount owed on the loan. This term does not include any charge,
fee, or other consideration usually charged or imposed by the facilitator
or the tax preparer in the ordinary course of business, such as fees
for tax return preparation and fees for the electronic filing of tax
returns, if the same fees in the same amount are customarily charged
to the facilitator's customers who do not receive RALs.
A person who for valuable consideration advises or assists
or offers to advise or assist in the preparation of income tax returns
for another.
A.
Any tax preparer or facilitator who advertises the
availability of an RAL shall not directly or indirectly represent
such loan as a tax refund. Any advertisement that mentions, refers,
relates or discusses and/or describes an RAL and/or proceeds of such
loan must state explicitly and conspicuously that the moneys being
referred to, related to, mentioned, discussed, described and/or offered
as represented in such advertisements are in fact a loan, and not
a tax refund, and that a refund anticipation fee and/or interest will
be charged by the tax preparer, the facilitator, or the person offering
or issuing such loan. The advertisement must also disclose the name
of the person, lender, tax preparer, creditor, or facilitator providing
the RAL.
B.
Before any consumer enters into an RAL transaction,
the tax preparer, facilitator or creditor, as applicable, shall disclose
to the consumer the following disclosure in writing, in English and
Spanish, in a form separate from the application, containing a legend
centered, in bold, capital letters in eighteen-point type, stating
"NOTICE," and stating the following language in at least fourteen-point
type:
|
This is a loan.
| |
|
Specifically, this is a refund anticipation
loan.
| |
|
You are not required to enter into this refund
anticipation loan agreement merely because you have received this
information.
| |
|
If you do sign a contract for a refund anticipation
loan, you will be taking out a loan, and you will be responsible for
repayment of the entire loan amount and all related costs and fees,
regardless of how much money you actually receive in your tax refund.
If your tax refund is less than expected, you must still repay the
entire amount of the loan.
| |
|
If you do not take out this refund anticipation
loan, you are eligible to receive a gross tax refund of approximately
$ ____ [insert amount].
| |
|
If you do take out this refund anticipation
loan, you will be responsible to pay $_____ [insert amount] in interest
and fees for the loan. After these fees are paid, you will receive
approximately $____ [insert amount].
| |
|
If your refund is delayed, you may have to pay
additional fees and interest.
| |
|
The estimated annual percentage rate of your
refund anticipation loan is _____% [insert amount]. This is based
on the estimated amount of time you will have borrowed money through
this refund anticipation loan.
| |
|
If you do take out this refund anticipation
loan, you can expect to receive your loan in approximately one to
two days.
| |
|
If you do not take out this refund anticipation
loan, you can still receive your tax refund quickly. If you file your
tax return electronically and receive your tax refund through the
mail, you can expect to receive your refund in approximately 15 to
22 days. If you file your tax return electronically and have your
tax refund directly deposited into a bank account, you can expect
to receive your refund in approximately eight to 15 days.
|
C.
In addition, the following disclosure must be made
to the consumer in writing, in both English and Spanish, in connection
with the RAC, in a form separate from the RAC and from the application,
containing a legend; centered, in bold, capital letters in eighteen-point
type, stating "NOTICE” and stating the following language in
at least fourteen-point type:
|
You are paying $[insert the amount of the fee]
to get your refund check through [insert name of issuer of refund
anticipation check]. You can avoid this fee and still receive your
refund in eight to 15 days by having the IRS deposit your refund directly
into your own bank account or in 15 to 22 days by having the IRS mail
the check.
|
E.
In the event that the taxpayer does not understand
English or Spanish, the tax preparer and/or facilitator shall also
provide a point-by-point oral explanation of the required disclosure
in a language understood by the taxpayer, and such explanation can
be provided through the use of a translator.
F.
It shall be the obligation of the tax preparer or
facilitator to complete the required disclosure accurately and thoroughly,
inclusive of all relevant information; to provide the required point-by-point
oral explanation when necessary; and to ensure that the completed
disclosure form is signed by the consumer before the consumer consummates
the RAL and/or RAC transaction.
A.
Every tax preparer and/or facilitator who offers RALs
and RACs shall display a current schedule for RALs and RACs and for
the electronic filing of the consumers tax return.
B.
Every tax preparer and/or facilitator who offers RALs
and RACs shall also prominently display on each fee schedule a legend
centered in bold, capital, one-inch letters, stating "NOTICE CONCERNING
REFUND ANTICIPATION LOANS," and the following verbatim statement:
“When you take out a refund anticipation loan, you are borrowing
money against your anticipated tax refund. If your tax refund is less
than expected, you must still repay the entire amount of the loan,
which includes interest and fees. If your refund is delayed, you may
have to pay additional costs. You can have your tax return filed electronically
and your refund directly deposited into your own bank account without
obtaining a loan or paying loan fees."
C.
The postings required by this section shall be made
in no less than twenty-eight-point type on a document measuring no
less than 16 inches by 20 inches. The postings required in this section
shall be displayed in a prominent location at each location where
the tax preparer or facilitator is processing the RALs and/or RACs.
D.
No tax preparer or facilitator may process or cause
to be processed an RAL or RAC unless the disclosure required by this
section is displayed and the fee actually charged for the RAL or RAC
is the same as the fee displayed on the schedule.
Any person claiming to be injured by the failure
of a tax preparer or facilitator to act in accordance with this article
shall have a cause of action against such tax preparer or facilitator
in any court of competent jurisdiction for any or all relief applicable
under the law.
A.
No tax preparer and/or facilitator shall market or
advertise an RAL without stating that the product is a loan and without
stating that tax filers can receive their refunds in eight to 15 days
by filing electronically without receiving a loan or paying the additional
fees and interest associated with the loan. No tax preparer and/or
facilitator shall market or advertise a refund anticipation loan without
also stating that tax filers will pay additional fees and/or interest
for this loan.
B.
The information about electronic filing and about
the additional fees and/or interest that will be charged for the RAL
must be in the same size type in the case of written materials and
receive the same amount of time in the case of sales presentations,
radio ads, phone scripts, and all other forms of advertisement as
the information on RALs.
