The regulation of income tax refund anticipation loans and providing a penalty

What it would have done

Summary by the Legislative Reference Bureau, the Legislature's nonpartisan drafting office. It's their wording, not ours.

Current law requires a creditor to make specified disclosures before a "refund anticipation loan" (RAL) is made to a customer. An RAL is defined as an agreement under which a creditor arranges to be repaid for a loan directly from the proceeds of a customer's income tax refund. Current law defines "creditor" to include a merchant who regularly engages in arranging an RAL for a customer, as well as the merchant who makes the RAL. The disclosure requirements are enforced by the Department of Financial Institutions (DFI).

This bill creates additional requirements, also enforced by DFI, for a creditor who makes or arranges an RAL. In addition to the disclosures required under current law, the bill requires a creditor to disclose the fee charged if an RAL is not approved. The bill also requires a creditor to disclose that: 1) the Internal Revenue Service and the Department of Revenue do not guarantee refunds; 2) an RAL is a loan and is not the customer's actual refund; and 3) a customer may rescind an RAL, as described below. Additionally, the bill requires disclosure of a chart indicating the estimated amount of time that a customer is expected to receive either a refund or loan for different filing and payment options, as well as for each loan program offered or arranged by the creditor. The chart must also indicate whether up-front payment of a tax preparation fee is required for each filing and payment option and each loan program. Also, the creditor must disclose how much of a refund a customer is expected to receive after charges and fees for the RAL are deducted from the customer's tax refund. Under the bill, the foregoing disclosures, as well as the disclosures required under current law, must be in a type size no smaller than 10 point. The bill also incorporates into the statutes certain requirements under DFI's rules, including requirements regarding the timing of the disclosures, as well as the manner for disclosing annual percentage interest rates of RALs. In addition, the bill incorporates into the statutes a DFI rule that requires a creditor to make certain disclosures that are required under federal law at the time that the creditor actually makes a loan.

Who's behind it

17 lawmakers are its authors⁠. All 17 are Democrats.

3 more lawmakers signed on in support⁠.