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Wisconsin Department of Revenue

 Refund Anticipation Loan (RALs) (En Español)

  1. What is a RAL?
  2. Who offers RALs?
  3. Who uses RALs?
  4. Why were RALs created?
  5. How much does a RAL cost?
  6. When are RALs typically offered?
  7. How can people avoid RALs?
  8. If a customer chooses to use a RAL, what is a creditor required to disclose in writing?
  1. What is a RAL?

    Refund Anticipation Loan (RAL). Other common names: Fast Cash Refunds, Express Money, Instant Refund, Paystub Loans, Holiday Loans. All of these common names are misleading because they are not refunds, they are loans. Taxpayers are paying high fees to borrow their own refund money.

  2. Who offers RALs?

    Businesses that prepare and file an individual's tax return typically offer "Fast Cash Refunds." This could be a tax preparation business, car dealership, furniture store, etc. RALs can also be provided by Check cashers and payday lenders. RALs can also be provided by Check cashers and payday lenders.

  3. Who uses RALs?

    Half of all RAL applicants are living on the edge of poverty. They are working families that typically receive the Earned Income Tax Credit (a credit designed to help pull many working families out of poverty).

  4. Why were RALs created?

    Before electronic filing, when it would take several weeks to process a paper tax return, a RAL was an attractive timely option to a family in need of money.

    But with today's electronic filing and direct deposit, refunds are available within 3-5 business days from the state and within 10 days from the IRS. The state and IRS offer the same speedy benefit without any cost.

  5. How much does a RAL cost?

    Consumers pay a variety of fees. Here is a listing of the typical fees:

    • RAL Loan Fee ($75)
    • Administrative/Electronic Filing Fee ($75)
    • Tax Preparation Fee ($100)

      Total: $250

    If a person does the math, they’ll quickly discover that a 10 day RAL on a $2000 loan refund carries an Annual Percentage Rate (APR) of 521%!

    Nationally, approximately 12.1 million consumers paid about $2 billion in fees in 2004. Here in Wisconsin, approximately 130,000 taxpayers paid an estimated $32.8 million in RAL fees.

    If the state or IRS denies or delays a refund (due to the interception of unpaid parking tickets, student loans, child support, etc.) the individual is responsible to pay back the RAL to the lender.

  6. When are RALs typically offered?

    During tax season (January through April).

  7. How can people avoid RALs?
    • E-file and request direct deposit — When an individual e-files, they can request the IRS and the state to electronically deposit the refund directly into their personal checking/savings account. It typically takes 10 business days for the IRS and 3-5 business days for the state to process and electronically deposit a refund.
    • Open a checking or savings account — An individual should consider opening a checking or savings account so their refund can be electronically deposited and available for immediate use. Many banks and/or credit unions will set-up an account for free. If a person chooses to use a check-cashing store, one should take note that these stores charge additional fees to cash a check ($50 on average). Nationally, 10 million families do not have bank accounts according to the National Consumer Law Center.
    • Visit a free tax preparation site (commonly referred to as VITA or TCE) — Trained volunteers will prepare an individual's tax return for free. Plus, many sites will file the return electronically to speed up the refund. To find a VITA or TCE site, call 1-800-829-1040.

  8. If a customer chooses to use a RAL, what is a creditor required to disclose in writing?
    • Any charges or fees for electronically filing the tax return.
    • The total dollar amount of all charges and fees.
    • The estimated annual percentage rate of the loan.
    • That the customer is responsible for repayment of the loan and the loan fees even if the tax refund is not paid or is paid in a lower amount than was anticipated.
    • The expected length of time by which the customer will receive the loan proceeds.
    • That the customer’s tax return can be e-filed without obtaining a refund anticipation loan.
    • The anticipated length of time within which customers could expect to receive their refund if their tax return was e-filed, and the customer does not request a refund anticipation loan.

    Once all the above is disclosed in writing, the customer can decide whether to sign the RAL agreement, or not.

Contact and Report Information:

FOR MORE INFORMATION PLEASE CONTACT:

WISCONSIN DEPARTMENT OF REVENUE
Customer Service Bureau
PO Box 8949
Madison, WI 53708-8949
Phone: (608) 266-2772
Fax: (608) 267-1030
E-Mail Additional Questions

Last updated January 3, 2008