Debt Indicator Canceled!
Press Release
IRS Discontinues the Debt Indicator
data on RAL use in NC
contact Peter Skillern: (919) 667-4201
Durham, NC: August 5, 2010:
CRA-NC applauds the decision by the IRS to end its provision of the debt indicator. The debt indicator acted as an underwriting service for providers of refund anticipation loans, by revealing the presence of outstanding tax liens.

"This action is years in the making," says Peter Skillern, executive director of the Community Reinvestment Association of North Carolina. "We welcome the IRS' decision to protect consumers from high cost refund anticipation loans."

The IRS intended for the debt indicator to bring a public benefit to consumers. That was not the case: RAL fees actually increased after the debt indicator was re-introduced several years ago.

There were more than 470,000 refund anticipation loans in North Carolina in 2006, which cost over $84 million.

CRA-NC has authored numerous studies that documented the impact of the refund anticipation loan. This was a very high cost product that was utilized by hundreds of thousands of North Carolina tax filers every year. In the majority of those cases, RAL users were recipients of the Earned Income Tax Credit (the EITC). Refund anticipation loans drained millions from the pocket books of our state's poorest households.

CRA-NC believes that the IRS will have to find an answer for the settlement of tax preparer fees. The IRS indicates that it will study the possibility of allowing filers to direct a portion of their refund to a tax preparer. This is an important point and hopefully something that will happen in the near future.

Here is a link to CRA-NC's most recent analysis of the use of refund anticipation loans in North Carolina.
The data covers returns from 2006, when complete data was available.

About RALs
A typical RAL includes a fee for the loan advance, but that is only the beginning. Tax preparers and their bank partners used the opportunity to load additional "junk" fees. Mo' Money Taxes, a tax filer that has since given up its license to make RALs in NC, included a "technology fee" and an "e-file" fee. Most had additional charges in order to put the refund onto a card, or to issue a check.