Commercial Appeal – Tax Trap

From the article:

For years, Sharon Harper went to a well-known tax preparer, with storefronts all around town, to have her taxes prepared.

Last year, she spent $389 to have her taxes done, and that wasn’t even to get a rapid refund anticipation loan, the worst practice of the predatory lending industry that focuses on the poor and uninformed. Her refund didn’t come for two weeks.

The preparer told Harper she had 15 years of experience, but couldn’t seem to answer Harper’s questions. As for planning for next year, the preparer had no advice at all.

The Internal Revenue Service’s Volunteer Income Tax Assistance program again this year is offering free tax return preparation help to low- and moderate-income Memphians. In this 2007 photo, Sheneda Porter (left) got assistance with her tax return from volunteer Karen Smith at the VITA office in Macy’s in Southland Mall.
“I felt like I was just someone in there they didn’t care about and they just wanted my money,” said Harper, who is married and works at a uniform company.

Not so this year, when Harper followed the advice of a friend and got her taxes done for free, through the Internal Revenue Service’s Volunteer Income Tax Assistance program, or VITA.

Harper spent less than two hours at the VITA site in Southland Mall — a fraction of the six or so hours she used to spend at her commercial preparer.

It will be even less of an excuse if legislation proposed by Richardson and a cadre of other Tennessee lawmakers is passed.

Richardson, a Memphis Democrat, is introducing a package of five related bills to address usurious practices, although none deals with refund anticipation loans directly. The one she has the most hope for is HB 3113, which would charge payday lenders a $2,500 fee.

The money would go toward “a special financial literacy trust fund earmarked for the sole purpose of generating revenue to provide funds for the promotion of teaching all citizens within this state the basics about financial education.”

Already, Tennessee is one of a few states that mandate financial education in high school, and if passed, HB 3113 could spread the knowledge to adults.

“I came up here wanting to do something about it and when I started getting into it, it started getting more and more complicated,” Richardson said.

For example, she learned that payday loans aren’t loans at all, under Tennessee law, but “early presentments,” and thus not regulated by legislation directed at lenders.

And she learned that low-dollar loans are hard to get, especially by the low-income households that need them most. Payday lenders fill a niche that traditional banking institutions don’t — you can get a quick $500 to get the car fixed, or deal with some emergency.

HB 3512 would encourage credit unions whose customers are mostly state employees to make low-fee, low-dollar ($500 and under) loans available to their customers.


See also:
Editorial: Rough road for loan limits – Commercial Appeal

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