Third-party Cross-collection of Bank Debt ("previous Debt")
As part of applying for the loan, the client is also directing his or her refund to the loan-issuing bank. Cross-collection occurs when the bank then uses this occasion to collect debt owed another bank. As the IRS Taxpayer Advocate described the practice in 2006: “if a taxpayer owes money on a defaulted RAL to Bank A and subsequently attempts to buy another RAL from Bank B, Bank B is authorized to collect the outstanding debt from the RAL proceeds, transmit the funds to Bank A.” This can also happen when the client signs up for non-loan banks product used to take the take the prep fee out of the refund. This practice is often not adequately disclosed to the tax preparation client. As a lawsuit filing against H&R Block by the California Attorney General in Feb. 2006 stated, “H&R Block does not adequately tell such customers about any alleged debts, or that when they sign the new RAL application, they agree to automatic debt collection - including collection on alleged RAL-related debts from other tax preparers or banks. These applications are denied, and the customer's anticipated refund is used to pay off the debt, plus a fee.” Tax prep firms sometimes merely vaguely refer to this practice as "previous debt."
Read more about this topic: Refund Anticipation Loan
Famous quotes containing the words bank and/or debt:
“A self is, by its very essence, a being with a past. One must look lengthwise backwards in the stream of time in order to see the self, or its shadow, now moving with the stream, now eddying in the currents from bank to bank of its channel, and now strenuously straining onwards in the pursuit of its chosen good.”
—Josiah Royce (1855–1916)
“... the novel, as a living force, if not as a work of art, owes an incalculable debt to what we call, mistakenly, the new psychology, to Freud, in his earlier interpretations, and more truly, I think, to Jung.”
—Ellen Glasgow (1873–1945)