Tax refund checks and refund anticipation loans could be rendered obsolete by tax refund debit cards from the IRS. substack/Flickr photo.

Tax refunds for people without bank accounts are becoming a problem in the era of electronic banking and tax filing. The Treasury Department thinks tax refund debit cards could be the solution. People without bank accounts, the so-called “unbanked” or “underbanked,” don’t benefit from the electronic funds transfer of a tax refund to a bank account from the IRS. Tax refund checks can take weeks to arrive. Unbanked people often resort to costly “refund anticipation loans” to get their money quickly. Plus, the overhead of printing and mailing checks costs millions of taxpayer dollars.

Tax refund debit cards bring speedy returns

The biggest advantage offered by tax refund debit cards is speed. The Associated Press reports that while direct deposits show up in bank accounts in eight to 15 days, tax refund checks can take six weeks to arrive in the mail. People without bank accounts are likely to borrow against their tax refunds, paying steep fees for a refund anticipation loan. Starting next year, a pilot tax refund debit card program will be offered to several hundred thousand taxpayers. The tax refund debit cards will work like checking accounts — without the checks or the bank. The cards will be insured like bank deposits and will include consumer protections from unauthorized purchases if they are lost or stolen. The cards may also be able to store other income and include bill-paying services.

Taxpayers encouraged to get bank accounts

The Center for Economic Progress estimates up to 26 million taxpayers could benefit from tax refund debit cards. That number was reached by subtracting direct deposit refunds from the 2010 tax season– 70.3 million — from total tax refunds of 96.3 million. Automated Trader reports that the Obama administration is exploring ways to encourage more people to get bank accounts. A $50 million request has been submitted to Congress for the 2011 budget to create “Bank on USA,” a program to help support state and local efforts to get more low-to-moderate income taxpayers into mainstream banking. An FDIC 2009 survey showed roughly 9 million households were without bank accounts.

Nipping refund anticipation loans in the bud

The tax refund debit card initiative is part of a broader program by the Obama administration to curtail federal policies that lead to risky financial decisions and provide people with better financial alternatives. The Wall Street Journal reports that the most recent policy change was announced last month. beginning in the 2011 tax season, the IRS will no longer provide tax return companies with “debt indicators” used by banks to process refund anticipation loans. The move makes it harder for banks to make the short-term loans, which come with high fees that pencil out to annual percentage rates from 50 percent up to 500 percent.

If you're a Social Security recipient with direct deposit, beware the personal loans your bank pushes on you. (Photo Credit: Chordboard/Wikipedia/Public Domain)

Social Security recipients – particularly those who depend entirely on it – don’t need anyone skimming off the top. That’s why there is a plan on the table to eliminate paper Social Security checks entirely. The Wall Street Journal reports that the Treasury Department plans to stop issuing paper Social Security checks by 2013 and distribute monies via direct deposit or prepaid debit cards. The intention is to save taxpayer dollars and make benefits more secure. However, numerous consumer groups are now concerned that those Social Security recipients whose funds are directly deposited into accounts at major banks like U.S. Bancorp, Wells Fargo and Fifth Third Bancorp are being targeted for high cost cash advance-style loans by the same banks.

Bank loans that target low-income seniors, disabled

According to the National Consumer Law Center, these new cash advance-like products are drawn from customers’ Social Security benefits as collateral. These personal loans can be requested from the bank via telephone or online. When the next benefits check comes via direct deposit, the bank takes its cut for the cash advance service. If the loan isn’t paid in full within 35 days, the bank automatically withdraws the amount owed, frequently producing overdraft and a morass of fees.

Making up for lost revenue by siphoning from baby boomers

As the latest Wall Street reform bill approaches law status, banks fear the effect the loss of automatic overdraft loans will have on their bottom line. The National Consumer Law Center believes this may be a big reason why these larger banks are aggressively pushing payday loan products to Social Security recipients. Sources indicate that as much as $700 million in Social Security benefits are taken each year to pay overdraft fees, which draws focus to the magnitude of the issue for America’s monolith banks.

Afraid of what banks will do with your Social Security direct deposit?

The Wall Street Journal recommends the prepaid debit card option for benefit disbursement. Costs are low and the cards are FDIC insured. The card can be used like a standard ATM card for purchases and bill payments.

Sources:

Wall Street Journal

Wikipedia

Social Security and dance lessons – enjoy the rant:

This should be considered a deadly weapon, in light of banks' runaway abuse of overdraft fee policies. (Photo: flickr.com)

Overdraft fees across the board have attracted the interest of Congress lately. Many have said that the way in which overdraft fees are assessed by banks and credit unions is predatory and dishonest. Charging the same high fee for each infraction – even if is for 1 cent – and then charging an additional fee for each day a customer’s account is overdrawn makes it nearly impossible for  already cash-strapped consumers to raise their heads above water.

In a recent case before California’s Supreme Court (Paul Miller et al. v Bank of American, NT & SA No. S149178), the ruling from Kruger v. Wells Fargo Bank (1974) 11 Cal.3d 352, 356 [113 Cal.Rptr. 449, 521 P.2d 441] (Kruger) was put to the test for Paul Miller, a retiree who depends upon Supplemental Social Security for his income (since 1992). Funds are directly deposited into his Bank of America checking account (since 1994). At the time that the direct deposits began, Miller was promised by Bank of America employees that those deposits would “be safe from debits or charges” unless he authorized otherwise.

But Overdraft Fees Came Calling

First, Bank of America accidentally deposited $1,799.83 in Miller’s account. They realized the error and reversed the credit, but not until Miller had made some charges. B of A also failed to give Miller notice of the deduction. The result was that his balance dipped below zero. Overdraft fees followed, which depleted a social security payment. For reference, Bank of America’s NSF fees at that time ranged from $14 to $32 per transaction. Up to five NSF fees could be processed against a checking account per day, with a maximum of $160 in overdraft fees allowed.

Miller pointed out that depleting his social security payment made it impossible for him to pay his rent or living expenses. Yet Bank of America told their long-time customer that he’d have to repay the part of the erroneous credit that he’d spent, but that he “could open a separate checking account for his SSI deposits that would not be used for repayment.” Miller did this, but a few months later the bank twice dipped into this new account to cover the overdraft fees. Both times Miller complained and the money was credited back to him.

And the Same Thing Happened Again

Although he did so infrequently, Miller occasionally overdrew his checking account. Each time, Bank of America hit him with overdraft fees that automatically deducted from his social security income. Bank employees who’d previously assured Miller that no deductions could be made from social security deposits without authorization now claimed that such funds received no “special treatment.”

Interestingly, during trial, a Bank of America executive responsible for checking products at Miller’s branch testified that Bank of America “could develop the capability to identify accounts into which public benefit funds are directly deposited, and could bypass charging NSF fees to those accounts.”

Why Didn’t Bank of America Take the Customer-Friendly Route with Overdraft Fees?

The same executive testified that “in order to prohibit certain account holders from overdrawing their accounts (which would eliminate the Bank’s need to recoup overdrafts or charge NSF fees), the Bank would have to ‘bounce’ more checks, withhold check deposits for the maximum allowable period of four days instead of one or two days before the Bank would make the funds available for withdrawal, eliminate point-of-sale purchases (but not personal identification number (PIN) transactions), and restrict automated teller machine (ATM) withdrawals from non-Bank ATMs.” The executive also stated that larger transactions would be processed before small – regardless of when the transactions occurred – because Bank of America felt larger transactions were “more important.”

More Important for Whom?

Any consumer who has felt the barbed sting of overdraft fees knows that the reordering of transactions is a way that banks stack the deck against consumers. Bank of America claimed in the Miller case that “the Bank’s practice of processing larger transactions before smaller ones results in the same total amount being overdrawn from a particular account.” Yes, but as Mr. Miller’s team clarified, doing so “increases the number and amount of NSF fees imposed.”

Miller would have none of that. His complaints alleged such things as “fraud, negligent misrepresentation, and intentional infliction of emotional distress, as well as violations of Code of Civil Procedure section 704.080; the Consumers Legal Remedies Act (CLRA), Civil Code section 1750 et seq.; the unfair competition law (UCL), Business and Professions Code section 17200 et seq., and the false advertising act, Business and Professions Code section 17500 et seq.” That’s a lengthy list of charges. How would Bank of America fare?

Nearly $300 Million at Stake in Overdraft Fees Alone

The California trial court found that fraud, negligent misrepresentation, CLRA, UCL, and false advertising claims were all viable issues that could be tried. A class was even certified that included “[a]ll California residents who have, have had or will have, at any time after August 13, 1994, a checking or savings deposit account with Bank of America into which payments of Social Security benefits or other public benefits are or have been directly deposited by the government or its agent.”

By the numbers, Bank of America had 1,079,414 such accounts in 2003. They received more than $800 million in government benefits via direct deposit. From January 1994 to May 2003, Bank of America took “at least $284,211,273 in NSF and other overdraft fees from accounts containing Social Security direct deposits.”

What Did the Jury Find in the Miller Case?

The jury found that Bank of America violated the CLRA by “falsely represent[ing] that it ha[d] the right to use Social Security funds from direct deposit accounts that receive government benefits including Social Security funds to pay overdrafts, insufficient fund[s] fees, . . . and money claims it has against class members.” Thus, the jury awarded $75,077,836 in compensatory damages for the class action. Each member also received $1,000 in statutory damages. Finally, Miller received $275,000 for emotional distress.

However, the Court of Appeal later reversed the trial court’s judgment, holding that Kruger did not apply. This is apparently still under review at this time.

What is the Kruger Argument?

Essentially, Kruger stated that a bank “may not exercise its right of setoff against deposits which, derived from unemployment and disability benefits, are protected from the claims of creditors.” But the Appeals Court found that the 1974 Kruger ruling “only applied to cases in which government payments were redirected to pay debts outside the bank.” Overdraft fees, by that logic, are internal debts.

The Office of the Comptroller of the Currency (OCC) sided with Bank of America’s ability to honor overdraft fees in the event of insufficient funds. They claimed that banks can do this without infringing upon 12 United States Code section 24, par. Seventh, or 12 Code of Federal Regulations part 7.4002 or 7.4007 (2009). (Letter, at p. 1). Overdraft fees are considered account maintenance, rather than creating a debt that the bank later collects.

The Consumer Loses Again

Runaway overdraft fees continue to plague consumers who can ill afford them. This is not to say that consumers should not be responsible for their expenditures, but in the case of Miller, I would argue extenuating circumstances. Until this is settled in California court – and until Congress forces banks to curtail abusive overdraft fee practices – the old phrase “buyer beware” still applies. At least there’s no deception with payday loans…

Even when there’s a paycheck coming in every week, sometimes it’s not enough to handle that unexpected emergency or expense that you didn’t budget for. Life can come at you fast with sudden changes such as your automobile breaking down, appliances needing repair, even some medical expenses that your insurance doesn’t cover.

With an instant online loan against your next paycheck, however, you can receive the funds you need to give you the peace of mind you deserve when it comes to your financial matters.

Minimal requirements

Let’s face it, an emergency is called that because it doesn’t pick the perfect time to happen. Unplanned events sometimes can throw us for a financial loop because things can be going along smoothly and all of a sudden, we need cash fast.

Whatever situation you may be facing, the reality is that you need help, and it needs to come right away. The last thing you want is a lot of legal jargon put under your nose and a mountain of paperwork to fill out explaining the last few years of your life only to be told that you don’t qualify. Many payday loans are available with no credit check, no faxing back papers and a quick, secure process that gets the money in your hands right away.

Take control of unplanned expenses

Sometimes the day starts off just perfectly, and before the sun goes down, unforeseen expenses have cropped up and put unwanted stress and worry on your plate. Getting a grip on expenses when they happen may seem difficult, but there is help for you.

When you take control with payday loans, you’re also working to preserve your credit rating and your peace of mind. Banks and many other lenders often want you to jump through all sorts of hoops and in the meantime, your expenses are unmet but not when you turn to this alternative to traditional financial institutions.

One-stop financial help helps you deal

When you’re dealing with problems you hadn’t anticipated, the last thing you want to be told is no or that you don’t qualify. Choosing a quick and easy loan of this nature is a one-stop process that puts you back on track and lets you focus on getting the problem solved and resuming your life.

Quick solutions and a helping hand right on time

With all of the information floating around about these payday loans, you shouldn’t get the real deal confused with some of these fly-by-night companies that are just creating gimmicks to take advantage of you. Just as importantly, you want to deal with a reputable company that you can trust because you will have to provide confidential information to them such as your bank account number for direct deposit of the funds to your account, your driver’s license and social security number to verify you are who you say you are, your employer’s name and address and your own address.

Apply for Payday Loans HERE!

A no-fax cash advance is a secure, instant online loan. You can be eligible for a loan of up to $1,500. They are convenient to use, because they can be filled out and be approved in only a few minutes. Your lender can deposit the funds needed directly into your bank account, and this can be done in as little as two hours following approval.

Bad credit does not pose a problem

Any bad credit history will not affect the application of this loan. If you have an unforeseen bill or an emergency for which you need cash, you are eligible for a simple, easy cash advance, regardless of your credit history. This is a huge advantage because regardless of one’s credit history, an emergency needs immediate attention, and it is one of the times during which you really cannot afford to have loans denied due to bad credit.

Flexibility to pay any bill

Obtaining such a loan is easy and beneficial to pay emergency bills. Not only unexpected ones, but any bills that may be overwhelming you at that moment. There’s no need to let your finances fall behind because of your bills accumulating or because of an unforeseen accident. You can use this type of loan to pay any bill, whether it’s an outstanding one or one that cropped up unexpectedly and needs to be paid immediately. You can count on these loans to help you through tough times such as these without any hassles when it comes to paying off important bills and getting their weight off your shoulders.

Easy application process

Getting a cash advance loan without credit checks is extremely simple. You can apply online, which is the fastest method. If you don’t apply online, you can still get the cash you need within 24 hours. Bank loans take extended periods of time, and you usually have to deal with requirement after requirement, but there’s none of that when it comes to this type of loan.

All you have to do is show that you have an income to pay back the loan when the time comes. This qualifies you to be approved for a loan, making the process simple and straightforward, which is how most people like things done when in the middle of a crisis.

A few facts to take into consideration

Remember, a cash advance loan can accumulate high fees if it is not paid back on time.  While cash advance is a viable option to turn to in case of an emergency, it is also important to remember this factor.

This is mainly due to the risk factor that comes with no credit checks. Use these loans only as a last resort. When you pick your lender, make sure the rate offered is one you can pay back within the time period that is agreed upon so that there are no hindrances in this process.

Apply for a Cash Advance HERE!

In an effort to attract new customers, banks are starting to help consumers with debt relief.  If you do an online search for “banks and deals,” you’ll surely find a wide variety of choices.

Banks are now realizing that to bring customers in, they need to  view the economy from the consumer’s point of view. Potential customers are wary about investing due to the recession, but saving is still a primary concern.  To capitalize on this, many banks are advertising specials that truly have a customer focus.  Here are some of the advantages you can find as reported by Bankrate.com and Money-rates.com.

Reward cards

A reward card can bring you as much as a 6 percent return by opening the account.  With these types of cards there are some rules to follow. First of all, you’ll need to make a certain number of debit purchases per month.  You’ll probably have to sign up for direct deposit and your transactions will be paperless.  If you fail to meet the requirements, though, you’re limit could drop to 0.5 percent, but if you can heed them, there are considerable savings involved.

The top three reward cards currently available are:

• Southern Missouri Bank. This bank offers an APY of 6.01 percent if you set up direct deposit and make at least 12 debit card transactions a month.   You can also hold a balance of up to $25,000 and still get this rate.
• Kansas State Bank. This bank offers the same APY, but you only have to make 10 debit card transactions monthly.  You have to sign up for direct deposit and must be an active online-user at least once a month.  This type of account also has a $25,000 cap.
• Rocky Mountain Bank. Again, this bank offers the same APY, but there is no requirement for debit charges.  You have to sign up for direct deposit and the deposit cap is $25,000.

Rewards cards can be very useful if you are an online user and frequent debit-card user.  It isn’t difficult to find these types of cards with a large returns that help to maximize your savings.  The extra money can help you find debt relief quicker.

Bonuses

Many banks are offering lucrative sign-up bonuses to new customers.  One tip for finding them is to look to your community banks rather than huge nationwide names.  Many smaller local banks are extending great savings to the public to lure new customers.  Here are some banks offering bonus programs to new customers:

• Wainright Bank and Trust in Boston offers a $200 savings bond for any new customer who opens an account with an initial deposit of $10 or more.  You will have to maintain a $500 balance, however, to avoid monthly fees.
• Citibank is offering a $25 bonus on their Ultimate Savings Account with $1,000.  It comes with an APY of 2.1percent, but you have to keep your balance for a minimum of 3 months to get the bonus.
• HSBC is offering bonuses of $25 to $75, depending on the plan you choose.  For a minimum $1,500 deposit, you will get you the higher bonus and you have to maintain a $15,000 combined HSBC account balance.  With a $500 deposit and maintaining a $1,500 combined balance you can earn the $25 bonus.

Online-only savings

Going online is still one of the easiest ways to find deals when it comes to banking.

GMAC is offering an APY of 2.65 percent for accounts opened online. The minimum deposit is $1, and there are no minimum balances or service fees.

Beverly National Bank Online is offering an APY of 2.6 percent for $5,000 minimum deposits.  You must maintain the $5,000 minimum to avoid monthly fees.

Heartland Bank Direct is offering an APY of 2.55 percent  on minimum deposits of $500. Again, there are  no minimum balances or monthly fees if you maintain the $500 balance.

Consumer savings

Consumers are looking for additional savings to help with debt relief. The recession depleted savings, stretched budgets and left people in an overall state of fear.  Fortunately there are banks that are providing beneficial services that will help you to increase savings quicker.