Dennis Apuan

(Denver)- Representative Dennis Apuan (D-Colorado Springs) is protecting consumers and increasing the transparency of Refund Anticipation Loans (RAL) with House Bill 1400.  The bill passed a second reading in the House today.  

A Refund Anticipation Loan is a 7-14 day, high-interest loan that is arranged by tax preparation companies like H&R Block, Jackson Hewitt and many other independent preparers based on a taxpayer’s anticipated refund. RALS can carry triple digits APRs and expose taxpayers to the risks of unpaid debt if their refunds do not arrive as expected. The typical APR for a RAL, including all related fees, ranges from 50% to 500%, depending on the amount of the loan (the smaller the loan, the higher the APR).

“It’s only fair that tax payers are made aware of the terms of their anticipation loans,” Rep. Apuan said. “Tax preparers need to spell out what’s in the fine print so that consumers can make informed decisions about RALs.”

Currently, Colorado regulates neither RALs nor the tax preparers who facilitate the loans. The bill will protect consumers by requiring tax preparers who facilitate advance loans on tax refunds to follow consumer protection safeguards, including: requiring preparers to post their current fee structures, to clearly explain the conditions of a RAL as well as alternatives to getting a loan, and to orally disclose the details of that loan, both in English and Spanish.

Terms and conditions will explain how long a loan lasts, consumer liability for the full amount of the loan regardless of whether their actual refund is less than expected, the amount of the RAL fee and interest rates, as well as any other conditions of the loan.

The bill will take effect in time for next year’s tax returns.

HB 1400 is sponsored by Senator Mike Johnston (D-Denver) in the Senate.