Thanks to Gridlock, Tax Prep Loans Live to Fight Another Day – Christopher Maag (Credit.com)

December 22, 2011

“A political standoff in Washington is creating a loophole for lenders looking for new ways to continue offering loans that many consumer advocates say are predatory. After years of work by federal regulators to prevent companies like H&R Block from selling costly tax anticipation loans, at least one company appears to have figured out a new way to offer such loans by exploiting Washington gridlock. Liberty Tax operates a chain of tax preparation stores around the country. Often located in struggling neighborhoods, the stores offer to do consumers’ taxes quickly, and give them cash immediately, based on their anticipated tax refund. Instant cash comes at a high price. Interest rates for such loans vary between 50% and 500%, according to the Center for Responsible Lending.  … The prospectus doesn’t name this new partner. But it does make one detail clear: The company is not a bank. Why is that important? Because for the foreseeable future, the Consumer Financial Protection Bureau has no power to regulate financial products offered by non-banks. ‘This is a great example of … why you need to get a director in there,’ says Kathleen Day, spokeswoman for the Center for Responsible Lending. ‘What this does is it creates an un-level playing field, which is what caused the current financial crisis.’ …’There is tremendous public support for holding Wall Street accountable, and for ending tricks and traps in the consumer financial marketplace,’ John Carey, spokesman for Americans for Financial Reform, said in a statement.” Click here for more.