Usurious Tax-Time Loans Drained $22.5 Million from the Bronx in Just One Year

Tax refund anticipation loans (RALs) siphoned $54.7 million from the pockets of low income New Yorkers in just one year, according to a report issued last week by the Neighborhood Economic Development Advocacy Project (NEDAP), a New York City-based financial justice group (disclosure: I sit on the organization's board). More than 40% of this amount came from the pockets of Bronx residents, at an estimated cost of nearly $22.5 million.

Based on its analysis of recently-released IRS data for tax filing year 2007, NEDAP found that RALs were overwhelmingly concentrated in New York City's low- and moderate-income neighborhoods of color, especially in the West Bronx. RALs drained millions of dollars from neighborhoods throughout the Bronx, Upper Manhattan, and Central and Northeast Brooklyn.

While the number of RALs made citywide dropped between 2006 and 2007, both the number of RALs and money spent on RALs went up in the Bronx; our borough’s share of NYC dollars spent on RALs jumped from 33% to 41%.

The four top zip codes for money lost to RALs were all in the Bronx, including 10453 which was first in the City at $1.74 million. 10456, 10452 and 10457 rounded out spots two through four.  Also in the top ten citywide were zip codes 10458, 10468 and 10467, each of which saw more than $1 million going towards RALs in 2007.

RALs are high-cost loans, secured by taxpayers’ projected tax refunds and Earned Income Tax Credits (EITC). Aggressively marketed to lower income taxpayers as a way to obtain fast cash, RALs carry interest rates from 50% to 500%, according to the National Consumer Law Center and Consumer Federation of America.