Poor Communities and Advocates Fight Tax-time Deception
As tax-time draws near, millions of low-income Americans will rush to obtain a cash advance on their tax returns in the form of a short-term loan to help pay bills or buy groceries. At tax service storefronts dotting impoverished neighborhoods across the country, employees dressed as Uncle Sam and the Statue of Liberty will greet them at the door -- a marketing gimmick aimed at a quintessentially American blend of pride and economic anxiety. Awash in congenial advertising, consumers might not realize they are borrowing money that already belongs to them, and this "instant" refund does not come cheap. According to the most recent data, by processing so-called Refund Anticipation Loans (RALs), every year, corporate agencies skim well over $1 billion dollars off of people's Earned Income Tax Credits. Also known as EITCs, the tax credits are specifically geared toward easing the tax burden faced by low-income Americans. Despite some government regulations on high-cost, short-term loans like RALs, advocates say service providers easily find ways to gut people's refunds through heavy service deductions. National and local advocacy groups are mobilizing against opportunistic lenders that prey on low-income taxpayers through legislative action to curb predatory lending, direct pressure on corporations, and financial literacy campaigns. To help protect low-income communities from exploitation, the Association of Community Organizations for Reform Now (ACORN) is campaigning in 65 cities against deceptive RAL practices. [more]