The Office of the Comptroller of the Currency (OCC) released a Policy Statement on Tax-Related Products and a Consumer Advisory on February 18, one month into the current tax season. The OCC is the U.S. Treasury Department agency that regulates national banks. Several national banks offer tax refund anticipation loans or RALs through partnerships with tax preparation services.

A coalition of community reinvestment and consumer organizations asked the U.S. Treasury Department’s Office of the Comptroller of the Currency (OCC), charged with overseeing consumer protections for national banks, to immediately implement its longstanding, but unenforced, disclosure requirements, advertising standards, and capital requirements for refund anticipation loans.  The consumer organizations sent a joint letter on February 4, 2010.

A new searchable database of free tax preparation sites launched by the University of Missouri could help tax filers avoid the high costs of paid preparers and tax refund anticipation loans. Refund anticipation loans, or RALs, are an expensive way to get your projected tax refund—in Illinois, they cost taxpayers $114 million in 2006 alone. Despite that, some borrowers choose RALs to avoid paying up front for tax preparation—preparers just deduct their fees from the loan proceeds.

The scramble to secure tax refund loan partnerships before the opening day of the 2010 tax season is the direct result of a regulatory crackdown that many consumer advocates believe was long overdue. With one major lender undercapitalized and another under increased scrutiny, it is clear regulators are beginning to take notice of the issue. However, both of these actions were taken to protect the safety and soundness of the banks themselves, not to protect the Illinois consumers who paid $114 million dollars in 2006 just to receive their tax refund loan a few days earlier than if they had waited for the IRS refund.