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December 12, 2006 > Watch out for this particular help!

Watch out for this particular help!

by Arnie Becker

According to the consumer advocacy organization, California Reinvestment Coalition (CRC), Jackson Hewitt, a leading tax preparer with more than 6,000 offices throughout the country, claims they want to "HELP" low-income consumers this year. Their help though is an expensive and risky loan cleverly titled: Holiday Express Loan Program (HELP). This “express” loan is based on a taxpayer's projected 2006 tax refund as calculated only with pay stub information. Jackson Hewitt started offering HELP loans as early as November 13 and will continue the program through early January.

The maximum amount a consumer can borrow is $600, but that amount includes a whopping loan fee of $70 to $100. HELP borrowers are also required to pay a non-refundable $50 income tax return preparation deposit. While borrowers are not required to have their taxes prepared by Jackson Hewitt, they must pay the deposit anyway. The loan (plus fees) is repaid from tax refund proceeds. In the event a Jackson Hewitt tax preparer over-estimates the refund amount, the customer will face an out-of-pocket cost for the difference between the refund and the loan.

Then, beginning January 2, consumers who anticipate tax refunds in excess of $2,000 qualify for another Jackson Hewitt loan. The "Money Now" loan goes as high as $1,900. Qualifying HELP borrowers may borrow more funds from a Money Now loan.

Rhea Serna, CRC policy advocate says, "The California Reinvestment Coalition is concerned that tax preparers are encouraging their customers to take out multiple loans to access their tax refund. Once the consumer is ready to file taxes, he or she may even take a third loan in the form of a Refund Anticipation Loan (RAL) to pay back the balances due on the previous two loans. This could cost the consumer hundreds of dollars, just to access his or her own money."

To reduce reliance on tax refund loans, CRC is undertaking a consumer education campaign. Staff will be working closely with Volunteer Income Tax Assistance (VITA) sites and other non-profits to encourage consumers to avoid RALs by obtaining free tax preparation services and having their refund directly deposited into their own bank account in as little as 10 days. Many non-profits will even help their “un-banked” clients open a bank account while they are having their taxes prepared. CRC is actively distributing free consumer brochures, printed in English and Spanish, warning against the use of tax refund loans. Brochures are available on their website at

CRC advocates for fair and equal access to banking and other financial services. More than 240 nonprofit organizations and public agencies, statewide, work with CRC.

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