If you think you're getting a good deal by obtaining a loan in anticipation of a refund, you could be making an expensive mistake.On Monday, several agencies talked about the dangers of anticipation loans. If you're a taxpayer toying with the idea of getting one of those loans, some say don't. "It's your money. You should not be paying anybody to get your money," said Juan Avila, Banco Popular. Avila and a consumer advocate group along with government officials warned taxpayers of the dangers of tax preparers promising instant refunds and fast cash without mentioning the real cost. "Only at the very end of getting a refund done, after you have gone through 20 pages of documents, do you see the fee structure," said David Malzahl, Center for Economic Progress. Those most at risk are low-income families who are struggling with bills, heating prices and those whose refunds are due to Illinois' earned income tax credit. It gives them a credit of $4,700 a year. "They take this chance to develop an asset and turn it into expensive, bad debt," said John Bouman, Shriver Center on Poverty Law. The loan allows the taxpayer to borrow against their tax refund, paying a fee to do so. Critics say most times the fees for those loans can translate into triple-digit annual percentage rates. "We are anticipating a rise now in refund anticipation, loans but other lending at higher interest rates while people try to get by upon the month to month salaries," said Dean Martinez, Illinois Department of Finance & Professional Regulation. Most companies offering the loans refuse to comment. H&R Block advises every client that the quickest and most affordable way is to e-file and direct deposit to their bank account and avoid problems by filing electronically. "It is fast, easy, and secure," said Brian Hamer, Illinois Department of Revenue. State officials are looking into how they can regulate the industry in order to try to protect taxpayers, especially those low-income earners who fall prey to scams. It's consumer beware.
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