Wisconsin League's Efforts to Reduce RAL Reliance Recognized

PEWAUKEE, Wis. – The Wisconsin Credit Union League was recently recognized for its work with the Wisconsin Department of Revenue on a project designed to decrease consumers’ reliance on refund anticipation loans. According to the Wisconsin Council on Children & Familes, in 2003 nearly 11% of tax filers in Wisconsin claimed the federal Earned Income Credit aimed “at lifting the working poor out of poverty.” Of those, 22.1% received their refunds through a RAL, a short-term loan secured by a tax filer’s expected refund and which the agency says is “aggressively” marketed to the poor by many paid tax preparation firms. In its report Refund Anticipation Loans in Wisconsin – Little Gained and Much Lost for Low-Income Workers and Local Economies^, the agency stated that the costs of RALs for the working poor and their families “are significant,” and local economies are “shortchanged” when RAL fees divert EITC dollars. Consequently several states and municipalities around the country have taken steps to control the spread of RALs in their communities. One of the solutions being pursued is the expansion of efforts to increase accounts among low-income residents at financial institutions. “The Wisconsin Department of Revenue is currently working with the Wisconsin Credit Union League on a project aimed at reaching out to low-income workers and immigrants and helping them establish bank accounts into which they can have their tax refunds deposited. While this project is at an early stage, it is just the kind of effort that could pay real dividends for low-income workers and their local communities. The Department and the Wisconsin Credit Union League are to be applauded for their efforts,” the Wisconsin Council on Children & Families stated in their report. The report concluded stating that, “The EITC – perhaps the most significant effort to move low-income workers out of poverty – has by many counts been successful. High-cost financial products such as refund anticipation loans diminish the credit’s impact, however. A concerted effort to increase free and low-cost tax preparation assistance for the poor, to “bank the unbanked”, to increase the consumer’s awareness of less expensive options, and to streamline tax forms and instructions, would shore up the benefits of the federal EITC and similar state credits, and would benefit thousands of low-income workers throughout the state of Wisconsin.” -