By now, most people have heard of so-called ‘quickie tax refund loans.’ New Jersey’s top law enforcement official is warning Garden State residents to be smart when filing your tax returns. These ultra-fast refund shops could actually cut deeply into federal refunds.

“Each year at this time, some tax preparers offer money up front in exchange for a large share of the taxpayer’s expected refund,” says State Attorney General Jeff Chiesa. “Taxpayers should resist the temptation of getting only some of their money today. You can instead receive your full refund within a few weeks by filing electronically and opting for direct deposit into your bank account.”

Quickie refund loans are sometimes falsely advertised as “instant” or “same day” tax refunds. 

The State Division of Consumer Affairs has taken enforcement action against tax preparers who engaged in this type of deceptive advertising.

Hidden Fees, High Interest Rates

Even if they are advertised honestly as refund anticipation loans (RALs), refund anticipation checks (RACs), or special lines of credit consumers should be aware that they may come with hidden fees and high interest rates.

“Quickie loans with hidden fees and high interest rates are often marketed to the working poor, and ultimately serve to deplete their assets, making it even harder to get by on a limited salary,” explains Eric Kanefsky, Acting Director of the Division of Consumer Affairs. “A better option is to take advantage of free tax preparation services available from the IRS, or non-profit groups such as the AARP, for those with lower incomes. Some free services even help their clients open bank accounts in order to get faster refunds with no fee.”

Report Shows Risks Of Quickie Refunds

A new report by the National Consumer Law Center (NCLC) and Consumer Federation of America (CFA) notes that RALs may be riskier and more expensive than before. Following widespread criticism, federally regulated banks no longer offer RALs.

The RALs that exist today are offered by payday lenders and other non-bank businesses. In some cases the interest rates for these loans are reportedly comparable to an APR of more than 90 percent, in addition to various fees.