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Tue March 27, 2007
Holiday Tax Loan
By Catherine M. Welch
Wilmington, NC – The Office of the North Carolina Commissioner of Banks is looking into whether so called pre-filing tax loans are legal.
Commercial tax preparation companies make the pitch that pre-filing tax loans are a way to grab immediate cash right before the holidays. By looking at a client's pay stub, tax preparers estimate future tax refunds and make loans of up to $500.
North Carolina's Deputy Commissioner for Banks, Mark Pierce, says when the client come back in February to pay off the pre-filing loan they often get pitched with another loan option against the refund.
So that's why it's troubling to us, is that we see a move toward offering a loan that leads to another loan, and that's where we start to get really concerned about the similarities between that and payday lending.
Pierce says his office is looking into whether these loans comply with state law. The state Commissioner of Banks is also urging residents to resist taking out the refund anticipation loans being marketed this time of year.