All too often, these type of important regulatory matters fly under the radar of community investment organizations, policymakers, and the media, and significant changes or expansions of high-cost, asset-stripping lending practices go unchallenged.
Because of the thoughtful comments of community organizations in the Chicago region and throughout the nation, the Office of Thrift Supervision will hold a public hearing to allow community organizations the chance to voice their concerns about high-cost refund anticipation lending and the asset-stripping effects this product has on lower-income people.
Specifically, the Office of Thrift Supervision staff has committed to addressing the pricing concerns for the refund anticipation loan products, and the regulatory oversight of third party tax preparers who market these high-cost loans in communities throughout the Chicago region.
According to a 2007 Woodstock study based on Internal Revenue Service data, 196,776 taxpayers in the Chicago region spent nearly $19 million on tax loans in 2003. The study also found that lower-income recipients of the Earned Income Tax Credit (EITC) were five times more likely to use RALs than non-recipients in the Chicago region and that taxpayers in predominately minority communities were over 9 times more likely to use a tax loan than taxpayers in predominately white communities.
Another Woodstock report, released in 2006, found that South suburban Chicago was heavily impacted by the high cost of tax refund loans. Of the top 15 communities in the Chicago region ranked by RAL usage, nine of these are located in the south suburbs.
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