Jackson Hewitt Pays State Fine to Settle Claims Over 'Pre-File' Loans
Posted July 10, 2007 11:20 a.m. EDT
Raleigh, N.C. — 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.