Report: poor hit hard by tax loans

Report: poor hit hard by tax loans

	Published : Fri, 04 May 2007 18:17 By : Agencies Print this Story

RALEIGH, N.C. (AP) - A state investigation determined about 500,000 North Carolinians spend more than $44 million a year on high-interest loans in anticipation of federal tax refunds.

The report out Friday found that 86 percent of so-called refund anticipation loans went to low-income borrowers in 2004, and that interest rates on some loans have topped 800 percent.

The investigation by the North Carolina Banking Commission was launched in January by State Treasurer Richard Moore, who is also chairman of the commission. On Friday, Moore called the loans a 'bad deal' and said he would work to bring down 'these outrageous interest rates' so North Carolinians can keep all of their tax refunds.

'Whether showing businesses that this is a bad practice, educating our citizens or passing legislation, we can bring about real change for taxpayers,' he said in a written statement.

Moore has joined financial officers in other states to criticize the loans, which are often offered by tax preparation services. The loans, which typically last from seven to 14 days before the tax refund arrives, can carry fees and annualized interest rates of more than 100 percent.

About 500,000 taxpayers in North Carolina obtain tax refund loans each year, according to Friday's report. Costs this year for the average refund amount of about $2,000 ranged from $78.30 to $174.95. Using an estimated average charge of $100 per loan would mean $44.3 million in refunds did not go to taxpayers, according to the report.

The report also said the number of outlets registered with the state that offer such loans has increased by 52 percent over the past six years.

Moore, a likely gubernatorial candidate in 2008, has said he ultimately would like to see these loans eliminated.

Last August, Moore and managers of state pension funds in Connecticut and New York asked H&R Block Inc. to reform their refund anticipation loans. The financial company ultimately changed the loan program two months after a federal judge approved a $39 million settlement in a class-action lawsuit by customers.