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Jackson Hewitt Pays State Fine to Settle Claims Over 'Pre-File' Loans

Posted July 10, 2007

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— Tax preparer Jackson Hewitt Inc. has agreed to pay almost $150,000 in fines to the state to settle concerns over its "pre-file" tax refund loans, officials said Tuesday.

Under state law, it’s illegal to use proceeds from a tax refund loan to pay off other debts. In many cases, Jackson Hewitt give people loans during the holidays with the understanding they’d repay the debt with their tax refund. Many of the original loans had extremely high interest rates, creating what North Carolina Office of Commissioner of Banks called a cycle of debt.

“Tax loans are only for tax time,” Deputy Commissioner of Banks Mark Pearce said in a statement. “We were concerned that these pre-file loans might lead to a new type of debt trap.”

Jackson Hewitt also agreed to stop entering into agreements with banks that permit proceeds from the tax refund loan to be used for any purposes other than what is permitted by state law.  The company also will pay $25,000 in investigative costs.

The company announced earlier this year it would no longer facilitate “pre-file” loans.


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  • Know All Jul 11, 2007


    Let us not be extreme. Do make a sensible comment so we can understand. That is what I do. Trust me. "I Know>"

  • FE Jul 10, 2007

    "Trust no one" - X Files

    Short enough?


  • Know All Jul 10, 2007

    Why in the world do these two who posted thinks anyone will read them? Just get to the point and do not be sooooo long winded. No one will read these posts. Trust me. "I Know."

  • faith trust and pixie dust Jul 10, 2007

    unlike Jackson Hewitt and their prefile loans...HR block had tax anticipation loans...but it was not run the same way...instead of having to "pay it back" they really just gave you your taxes early...then you got the rest at tax time...They do only give you a small percentage of your tax refund back, not the entire anticipated amount.

    I know many people that rush to do things like this...I just waite for Uncle Sam to send me my check...and then I will usually invest it in something that will be of great help when I retire..like an IRA or CD's that have to mature before you can touch it...Bonds are great for investing as well...instead of having to take loans out, it is better to just anticipate running into hard times eventually...and so savings accounts are great...or you can just cash out a bond that has matured....

  • FE Jul 10, 2007

    It is my understanding that the folks were lined up at the doors in January to take advantage of the pre-file loans. These were separate from the "holiday" loans offered before Christmas. Both loans required a guesstimate of refunds (usually via the earned income tax credit!) and the checks were written.

    While few people in their right mind would ever consider such an expensive way to obtain money, rest assured there was a strong demand for such money. Frequently folks were paying with the house's (guvment!) money, so who even cared about the fees. Answer a few questions, walk out the door with a check for $500 or so, and la-de-da.

    As for the "cycle of debt" numerous folks routinely pay hundreds of dollars to get their money "fast", and the tax firms laugh all the way to the bank with the fees charged.

    I am somewhat curious as to how the cited state law restricts the consumer use of ANY loan proceeds, however. The lawyers can weigh in on that issue.