Mr. AKAKA-- Mr. President, I originally filed an amendment that would prohibit the use of funds within this appropriations bill for the Debt Indicator program. The Debt Indicator program is an acknowledgment from the Internal Revenue Service (IRS) to tax preparers stating whether the taxpayer's refund will be paid or intercepted for government debts. I continue to be outraged that the IRS provides the service of the Debt Indicator program to predatory refund anticipation loan (RAL) originators while cutting essential services to low-income taxpayers.

Mr. President, the Earned Income Tax Credit (EITC) is a refundable federal income tax credit that is of great benefit to low-income working individuals and families. Many taxpayers who earn the EITC receive their tax refunds through predatory RALs. The excessive interest rates and fees charged on RALs are not justified because of the short duration of these loans and the minimal risk of repayment that they present. The IRS debt indicator program further reduces risk by assuring RAL lenders that the taxpayer's refund be issued and thus the loan will be repaid. The EITC was diminished by an estimated $1.75 billion in 1999. I am concerned about the aggressive marketing of RALs in low-income neighborhoods where EITC recipients often live. These loans take money away from the day-to-day needs of lower-income families.

RALs carry little risk because the Debt Indicator program informs the lender whether or not an applicant owes federal, state taxes, child support, student loans, or other government obligations. This service assists the tax preparer in ascertaining applicant ability to obtain their full refund. In 1995, the use of the Debt Indicator was suspended because of massive fraud in e-filed returns with RALs. This suspension caused RAL participation to decline. RAL prices were expected go down as a result of the reinstatement of the Debt Indicator in 1999. However, this has not occurred. The Debt Indicator should once again be stopped. The IRS should not be facilitating these predatory loans that allow tax preparers to reap outrageous profits by exploiting working families.

H & R Block Chief Executive Officer Frank L. Salizzoni remarked, upon the reinstatement of the Debt Indicator, that it "is good news for many of our clients who opt to receive the amount of their refund through RALs. The IRS program will likely result in substantially lower fees for this service." This has not happened. According to the National Consumer Law Center's report entitled, "Corporate Welfare for the RAL Industry: The Debt Indicator, IRS Subsidy, and Tax Fraud," prices for RALs dipped in 2000, but since then have gone up beyond pre-Debt Indicator levels. The report also points out that the "main effect of the debt indicator appears to be, not in lowering RAL fees, but in higher RAL profits." I ask unanimous consent that a copy of the report be included in the Record.

The NCLC report also indicates that the reinstatement of the Debt Indicator "generates more fraud related to RALs, which the IRS must spend enforcement dollars to address."

Mr. President, the Debt Indicator serves only to facilitate the exploitation of taxpayers. The reinstatement of the Debt Indicator has not helped consumers to access cheaper RALs nor has it reduced RAL related fraud. If the Debt Indicator is removed, then the loans become riskier and the tax preparers may not aggressively market them among EITC filers. The IRS should not be aiding efforts that take the earned benefits away from low-income families.

RALs are extremely short term loans that unnecessarily diminish the EITC. There are alternatives to speeding up refunds such as filing electronically or having the refund directly deposited into a bank or credit union account. Using these methods, taxpayers can receive their returns in about 7 to 10 days without paying the high fees associated with RALs.

Mr. President, instead of offering my amendment to prevent the use of funds for the DI, I chose to modify my amendment to have the Internal Revenue Service, along with the National Taxpayer Advocate, study the use of the Debt Indicator, the debt collection offset practice, and recommendations that could reduce the amount of time required to deliver tax refunds. In addition, the report shall study whether the Debt Indicator facilitates the use of RALs, evaluate alternatives to RALs, and examine the feasibility of debit cards being used to distribute refunds.

Mr. President, I look forward to reviewing the results of the study. I welcome the opportunity to work with the Internal Revenue Service, the National Taxpayer Advocate, and my colleagues to reduce the use of RALs and to expand access to alternative methods of obtaining timely tax refunds. I want to thank Senator Bond and Senator Murray for working with me to incorporate this language into the legislation and hope it will be maintained in the conference report through conference negotiations with the other body.

Thank you, Mr. President.