By Don Bolding
Killeen Daily Herald
In response to a 2007 Defense Department regulation designed to protect military personnel and families from high interest loans, H&R Block – a tax, mortgage and financial services firm – has developed a new product called the Military Refund Anticipation Loan, which keeps the total amount of interest and fees below 36 percent.
The regulation, celebrated in a public forum last year at the Killeen Civic and Conference Center by Holly Petraeus, wife of Gen. David Petraeus and director of the Better Business Bureau Military Line, prohibits military personnel from signing for loans above the 36 percent "military APR," which includes interest and all fees and costs connected with a loan.
Its primary targets are "payday loans," which tend to trap borrowers in cycles of debt and auto title loans that use motor vehicles as collateral, but it includes the refund anticipation loan offered by many commercial tax services involving automatic subtraction of interest and fees from a check, often issued by a collaborating financial institution that receives the government refund check directly.
H&R Block still has its standard RAL offered to civilians.
"The interest rate for all RALs is similar," said Michelle Laverdiere, district manager in Temple, "but the fees may differ for the traditional RAL."
Other tax services have addressed the military regulation, including Jackson Hewitt Tax Service, which has partnered with Pioneer Services to offer a loan not tied to tax return preparation.
Karen Cain, general manager of Jackson Hewitt offices in Killeen and Copperas Cove, said the interest rate is about 23 percent and that customers may use their tax refunds to pay off the loans. The company still offers the traditional RAL to civilian customers.
The III Corps and Fort Hood public affairs office referred questions about any military response to the tax services' moves to Defense Department public affairs officials in Washington, but they were unavailable for comment Friday afternoon.
To get a RAL of any type, a customer's return has to be accepted by the Internal Revenue Service, and the customer has to pass a credit check by the issuing bank or other lending institution. Even if the loan is approved, the refund may be seized to pay down delinquent federally-sponsored loans or child support.
"We developed the Military RAL because each year thousands of service men and women rely on refund anticipation loans instead of unregulated and far more expensive alternatives to avoid suffering financial hardship." He invited comments by e-mail at firstname.lastname@example.org or by fax at (816) 854-8212.
The military regulation covers military personnel on active duty, including activated reservists, plus spouses, dependent children and people relying on service members for a majority of their financial support. Lenders are supposed to give such people information about loan rates orally and in writing.
Enforcement about compliance is up to individual states, and Texas is among those without a legal mechanism for action, but compliance is binding on military personnel.
The Defense Department formed the rule to control financial stress that might reduce service personnel's combat readiness.
Richard Kitterman, executive director of the BBB for Central Texas, said he still opposed any loan product offering rapid delivery of the value of a tax refund minus fees.
"Service people can get assistance on post in computing their tax returns and sending them electronically and can get the full refund in a couple of weeks," he said. "The RAL can look attractive to people who believe themselves to be in financial binds, but there are resources for both military personnel and civilians to learn to manage money through the year to avoid financial crunches and learn to resist indebtedness.
"A couple of hundred dollars may not look like much if you're getting a refund of several thousand, but it will look like a lot if it's in your pocket in August, or if it's not."
Contact Don Bolding at email@example.com or call (254) 501-7557