Washington, D.C. - U.S. Senator Daniel K. Akaka today introduced the Taxpayer Abuse Prevention Act which would greatly reduce the scope of abuses caused by refund anticipation loans (RALs).
Senator Akaka said, "My bill will protect consumers against predatory loans, reduce the involvement of the Department of the Treasury in facilitating the exploitation of taxpayers, and expand access to opportunities for saving and lending through mainstream financial services."
The bill will do this by:
- Prohibiting refund anticipation loans that utilize earned income tax credit benefits
- Ending the Debt Indicator program, which shares taxpayers' personal information - beyond what is necessary - with tax preparers
- Prohibiting mandatory arbitration clauses for RALs to ensure that consumers have the ability to take future legal action if necessary
- Requiring that the Treasury Department provide the opportunity for low and moderate income taxpayers to open a low-cost direct deposit account at a federally insured bank or credit union through the use of appropriate tax forms. Filing electronically and having the refund direct deposited into a bank or credit union account permits taxpayers to receive their refunds in approximately seven to ten days, without paying the high fees associated with RALs.
"Too many working families are susceptible to predatory lending because they are left out of the financial mainstream," said Senator Akaka. "Many of the unbanked are low- and moderate-income families that can ill afford to have their earnings unnecessarily diminished by a reliance on high-cost and often predatory financial services. In addition, the unbanked are unable to save securely to prepare for the loss of a job, a family illness, a down payment on a first home, or education expenses."
The unbanked rely on alternative financial service providers to obtain cash from checks, pay bills, send remittances, utilize payday loans, and obtain credit.
Senator Akaka added, "It deeply troubles me to hear that so much money is lost by individuals who pay excessive amounts to have their taxes prepared, borrow money or send remittances to their loved ones in other countries."
Supporters of this legislation include the Association of Community Organizations for Reform Now, the Children's Defense Fund, the Consumer Federation of America, Consumers Union, the National Consumer Law Center, and the Center for Responsible Lending.
Co-sponsoring the bill are Senator Jeff Bingaman (D-NM), Senator Paul Sarbanes (D-MD), Senator Mark Dayton (D-MN), and Senator Richard Durbin (D-IL).
