More Control of Tax Refund Loans Urged

Outlets that offer refund-anticipation loans, or RALs, charge exorbitant interest rates so people can get cash fast -- sometimes topping 800 percent -- and Moore on Friday called for more oversight of the practice.

"This is one of the more despicable financial products out there," he said.

More than 400,000 North Carolina taxpayers obtain RALs each year, at an average charge of $100 per loan, Moore said. The number of outlets offering the service has increased by more than 50 percent in the past six years, he said.

"That was $44 million, $44 million of money that North Carolinians, in my view, wasted to get their refunds back anywhere from two days to two weeks faster," he said.

Consumer groups have found that 86 percent of the people who get RALs are low-income workers. Many simply don't understand how the loans work and wind up losing money on interest charges they can't afford, according to consumer advocates.

Because most of the loans are made by banks chartered outside of North Carolina, the state has limited oversight of the practice. But he said lawmakers have options to tighten up regulation.

The state’s RAL Act could be amended to require that a borrower obtain counseling before signing up for a tax refund loan or to prohibit tax refund preparers from offering refund loans.

"My preference would be an outright bar of it," Moore said, noting state law already prohibits loans against state tax refunds.