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     Yvettep AALBC .com Platinum Poster Username: Yvettep Post Number: 3496 Registered: 01-2005 Rating: N/A |
AN FRANCISCO--Tax season is busy at the Chinese Newcomers Service Center in San Francisco, where the volunteer income tax assistance program — VITA—draws up to 1,600 clients a year seeking free help preparing their tax returns. This year, the VITA centers have had to compete with the star-power of basketball legend Magic Johnson. Since November 2008, Johnson has appeared on billboards and in TV ad campaigns as the pitchman for Jackson Hewitt, the tax preparing company. His slogan, “It’s Money Like Magic,” is meant to lure customers to the company’s Money Loan Now product, a refund anticipation loan, or RAL. RALs are short-term loans secured by federal income tax refunds, which typically carry high interest rates — as much as 150 percent. “I saw the ad with Magic Johnson on TV, and from a commercial point of view, it does attract clients, but I don’t endorse it,” said Alex Ng, VITA program manager at the center, which is endorsed by the IRS. “We educate our clients not to do the RAL because they might end up losing a lot of money, as well as interest, if they aren’t entitled to a refund. Then they would be in trouble. They should never turn to the RAL to get a faster refund when we can do the same by doing the e-filing.” In economic hard times, Magic Johnson’s siren call of fast, easy money may be hard for many struggling families to resist, say consumer advocates, and that is worrisome. RALS are usually pitched to low-income clients who qualify for the federal Earned Income Tax Credit (EITC)—worth as much as $4,200 per family, depending on the number of children. RALs and the companies, including Jackson Hewitt and H&R Block, that sell them have been the targets of state prosecution for fraud because customers often did not know they were taking out loans. In many cases, loans were based on inaccurate income reporting, locking people into repaying loans that were much higher than the actual tax refund. In 2007, Jackson Hewitt was fined $5 million by California Attorney General Jerry Brown for its RAL program, and now is under a strict injunction on how it can sell its loan products. And just this January, H&R Block settled a suit brought by Brown’s office for marketing RALs as tax refunds, agreeing to pay $4.85 million.... Full article: http://tinyurl.com/chjrn3 |
