Your point regarding the USPS versus FedEx example is a good one, and is well taken. I do agree that there are times when paying a premium is appropriate.

My argument, however, with the RALs is not that it is a premium for services but that the premium is both extraordinarily high and is - as you point out - targeted towards a certain demographic. In that regard, there are a lot of issues of concern.

For one, you note that these services are accompanied by having a return done by a professional preparer. Fair enough. But clearly the professional preparer is doing a disservice to the taxpayer by not advising that waiting for a refund is not always necessarily. At the minimum, there are simple adjustments that can be made to put money back into the hands of taxpayers faster. But, of course, there is no incentive to provide this information at a service that sells RALs.

Additionally, your remark that it is absurd that these products inspire tax preparers to be dishonest is not backed by the facts. The IRS has successfully prosecuted and/or shut down providers on the basis that they were preparing false returns to gain more refunds to sell more product - and the IRS themselves view RAL providers as a threat to the tax system. See this post: http://www.taxgirl.com/irs-may-say-no-to-rapid-refund-type-loans/

There are also a number of lawsuits targeting providers, as outlined here: http://www.taxgirl.com/hr-on-the-chopping-block/

Additionally, yours is one of a handful of “pro” comments on this issue. Largely, the feedback through comments and email has been extremely negative as to RALs.

I do not agree with your statements or your position in this matter. Although it may be true that the interest rate is greater than you or I would accept, this product does serve a section of our society. First, not all people filing tax returns have a bank account for fees to be deposited into. This leave only an IRS mailed check as an option. This could take up 3 weeks to arrive, if ever. It is not secure nor a guaranteed delivery method. Second, in order to have taxes done, most people pay a tax preparer for their services. Several bank products offer taxpayers to receive their refund in not only a secured manner (cashiers check) but with tax prep fees deducted. Meaning, taxpayer did not have to pay out-of-pocket to receive their overpayment of any possible taxes. The argument against Bank Products and the RAL banking industry is always made by people who do not depend on a tax refund nor plan financially around receiving a tax refund.

And the argument that these products inspire tax preparers to be dishonest is absurd. With or without these products, tax preparers will charge for preparing tax returns and have the option of inflating returns and charging more for that.

Think of it this way. To mail a letter to New York costs only .41 (soon to be .43). But, I can send it overnight with FedEx or UPS for a premium, around $10.00. Why is this an accepted practice? Can I not send a letter to New York for cheaper? In any business, consumers know that if they want it faster, they will pay a premium and it is up to them to decide if it is worth it.

Humbly,

David