Commentary By Page Schindler Buchanan: Early Refund Woes

Tax Season is upon us, and if you're like most Americans who are counting pennies, you can't get your refund fast enough.

For many low-income Americans, the urgency of unpaid bills and the challenge of not having a bank account can lead to a path that costs them too many precious refund dollars: refund anticipation loans.

Refund anticipation loans, or RALs, are short-term loans to give people their anticipated refund in as little as a day, as opposed to waiting three or four weeks for an IRS check.

Sound like a good way to get your money a little early? Well one of the major suppliers of these loans charges what works out to the equivalent of an annual interest rate of 149 percent -- quite a chunk for a couple weeks advance.

And the people targeted for these loans can hardly afford it. Eighty seven percent of taxpayers who applied for a RAL in 2009 were low-income, and nearly two-thirds got the earned income tax credit. This means that federal dollars meant to help keep families out of poverty are going instead to pay short-term lenders.

We see these taxpayers every day in our free tax prep clinics, where we save low-income families fees they can't afford and steer them away from refund anticipation loans and related products.

They often don't even realize how much they are paying for these loans and just consider it part of the, rather expensive, tax preparation process.

If it sounds like someone should be doing something, you're right.

This tax season the IRS blocked access to information on taxpayer debt, making RALs riskier for lenders. And the FDIC is cracking down, effectively ending the practice, though one lender is fighting back in court.

What do you think? Share your comments below.