The Sargent Shriver Center on Poverty Law joins advocates across the country in celebrating Chase Bank’s recent announcement that it will exit the Refund Anticipation Loan (RAL) industry. Chase Bank was the largest provider of short-term, high-interest-rate bank loans, or RALs, contracting with over 13,000 independent tax preparers nationwide. According to the Woodstock Institute, Chase provided 1.5 million RALs annually based on expected income tax refunds.
As discussed in our previous blog, the Internal Revenue Service (IRS) is currently creating a task force to review RAL loans issued by tax preparation sites in order to regulate the industry. While no rules, regulations, or recommendations have been issued yet, the formation of the task force and the increased scrutiny of such products by regulators appear to be having the intended effects. The Office of the Comptroller of the Currency (OCC) also issued new guidance on the delivery of RALs earlier this year.
Chase joins other banks and financial institutions that have recently left the market; Jackson Hewitt lost its RAL partner when Santa Barbara Bank & Trust was forced to stop selling RALs, and the Federal Deposit Insurance Corporation (FDIC) mandated a cease and desist order for Republic Bank & Trust’s RAL program until reforms were implemented.
Despite their history in the RAL industry, Chase claimed that its sale of RALs was no longer a “strategic fit” for their business model, and cited increased scrutiny and additional regulations as part of its decision to leave the market. While we applaud Chase Bank for being responsible and exiting the RAL industry, its actions were the direct result of constant pressure from community organizations and consumer advocates, including the Shriver Center. In sum, Chase was forced to comply with the new OCC guidelines, or exit the RAL industry. This withdrawal is another victory for working families and may mark the beginning of the end for refund anticipation loans.
This post was coauthored by Susan Ritacca.