Commercial Law - Consumer Protection - Refund Anticipation Loans and Checks

House Bill 1206 (Chapter 730, Acts of 2010)

This Act creates Subtitle 38 of the Commercial Law Article to provide for new refund anticipation loan and refund anticipation check requirements for individual tax preparers.

This Act requires any facilitator of refund anticipation loans and checks to comply with the requirements of this section. If a facilitator fails to comply with the requirements, they are prohibited from soliciting the execution of, processing, receiving or accepting an application or agreement for a refund anticipation loan or check or facilitating the making of such a loan or check.

The Act defines facilitator as a person who, individually or in conjunction or cooperation with another person, processes, receives, or accepts an application or agreement for a refund anticipation loan or refund anticipation check, services or collects on a refund anticipation loan or refund anticipation check, or facilitates the making of a refund anticipation loan or refund anticipation check. A facilitator does not include certain financial institutions such as a bank, savings and loan association or credit union; an affiliate or subsidiary of a bank, savings and loan association, or credit union that, in connection with refund anticipation loans or refund anticipation checks acts solely as a servicer for the financial institution with which it is affiliated or of which it is a subsidiary; or a person who acts solely as an intermediary and does not interact with the public in the making of a refund anticipation loan or refund anticipation check.

The Act defines a "refund anticipation loan" as:

• a loan arranged to be paid directly or indirectly from the proceeds of a consumer's tax refund; and
• includes the sale, assignment, or purchase of a consumer's tax refund at a discount or for a fee, whether or not the consumer must repay the buyer or assignee if the Internal Revenue Service denies or reduces the consumer's tax refund.

This Act requires a facilitator to display certain disclosures. The Act provides that a facilitator must display a schedule of fees charged for facilitating refund anticipation loans and checks along with interest rates charged for certain loan and check amounts.

The Act also provides that a facilitator must display a notice that explains to consumers that a refund anticipation loan or check is a loan against their income tax refund. The notice also explains that a consumer may receive their refund in the normal course and direct deposited into their account without paying for a loan or other product. The Act provides that this notice must be at least 14 point type on a sign not less than 16 x 20 inches. The Act also provides that a facilitator may not charge any fee other than those disclosed on the schedules.

The Act provides that if a consumer does apply through a facilitator for a refund anticipation loan, the facilitator must disclose on a separate form, the fee, applicable interest rate percentage, the time in which the loan will be paid, and the notice as mentioned above. For a refund anticipation check, the notice is very similar but tailored to the check process.

The Act provides that the disclosures must be provided in English and the language in which the facilitator and consumer orally communicate. Under the Act, a facilitator may not require a consumer to enter into a refund anticipation loan in order to complete a tax return among other prohibitions. This subsection does not preclude a facilitator from charging a fee to complete an income tax return.

The Act provides for multiple violations and penalties that a facilitator will face including violations under Title 13 of the Commercial Law Article and actual and consequential damages.

This Act will take effect October 1, 2010.