Washington, D.C. - U.S. Senator Daniel K. Akaka (D-HI) today reintroduced the Taxpayer Abuse Prevention Act, which will protect millions of taxpayers targeted by predatory refund anticipation loans (RALs), and expand their access to mainstream financial services.  The bill is cosponsored by U.S. Senators Jeff Bingaman (D-NM) and Richard Durbin (D-IL).  Representative Jan Schakowsky (D-IL) is introducing a companion bill in the House. 

The bill will protect taxpayers 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, forced to rely on alternative financial service providers to obtain cash from checks, pay bills, send remittances, utilize payday loans, and obtain credit," Senator Akaka said. 

Between 25 and 56 million American adults are not using mainstream, insured financial institutions. 

"This bill would help ensure that unscrupulous companies do not take advantage of hard working Americans, while requiring that the IRS take steps to enable taxpayers to get their refunds in a timely and safe manner," Senator Bingaman said.

"When low-income families don't have access to reliable financial advice, they often become victims of some of the worst abuses in the tax preparation industry," Senator Durbin said. "This legislation will help establish better financial services for these families so that they can make informed and responsible decisions about investing their tax refunds and planning for their future."

"Earned Income Tax Credit benefits intended for working families are diminished by excessive tax preparation fees and the use of high-interest refund anticipation loans," Akaka added.  "The EITC is intended to help working families meet their food, clothing, housing, transportation, and education needs.  Working families cannot afford to lose a significant portion of their EITC funds by expensive, short-term, RALs.  EITC recipients lost an estimated $649 million in loan fees plus application or documentation fees in 2005.  While the EITC is benefitting families who need it most, the EITC's impact is being limited unnecessarily."

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