By Natalie Moore

January 21, 2010

 

A new study shows that Illinois taxpayers who borrow from their projected tax return pay high fees.

People like Refund Anticipation Loans, or RALs, because it lets them get their expected tax refunds a couple of days after filing. 

Lenders like them because the fees in Illinois alone total $114 million a year. Black tax filers in Chicago are more than three times likely to use RALs. Zip codes with the highest users include Englewood and Austin. 

Katie Buitrago is with the Woodstock Institute, a nonprofit policy think tank that did the study. 

BUITRAGO: Generally, high-cost lenders tend to concentrate in communities of color. Majority of people who use RALs are earned-income tax credit recipients. RAL tax preparers tend to market toward these recipients. 

Those filers tend to get a larger refund. Woodstock analysts say they want to pressure the Internal Revenue Service to put a cap on borrowing fees. 

 

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