More than 20 million American taxpayers spent at least an estimated half a billion dollars in 2017 on financial products that are based on their anticipated tax refund, according to the National Consumer Law Center. Tax-time financial products, typically offered by banks and made available by providers of tax preparation services, include refund advances and refund anticipation loans (credit products) and refund transfers (deposit product).
In fiscal year 2017, the Internal Revenue Service (IRS) processed more than 150 million individual federal income tax returns, and issued almost 120 million refunds totaling almost $383 billion, according to IRS.
Trends in the market for tax-time financial products since 2012 include
• the decline of refund anticipation loans (short-term loans subject to finance charges and fees),
• the rise in use of refund transfers (temporary bank accounts in which to receive funds), and
• the introduction of refund advances (loans with no fees or finance charges).
More recent product developments include increased online access to products for self-filers, higher refund advance amounts, the introduction of new products, and for tax year 2019, the reintroduction of fee-based loans. Specifically, taxpayers who made less than $40,000 were significantly more likely to use the products than those who made more.
African-American households were 36 percent more likely to use the products than white households. Product users tend to have immediate cash needs, according to studies Government Accountability Office. For these users, tax-time financial products generally provide easier access to cash and more cash at a lower cost than alternatives such as payday, pawnshop, or car title loans.
MKG Tax Consultants provides Tax Refund Financial Products to customers with limited access to consumer credit from banks, thrifts, credit cards, and lenders determined by their tax refund status instead of their FICO score as a bank product or RAC refund Anticipation Check to the under bank by providing no upfront tax preparation fee’s and consumer loan products.