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Legalized Theft

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Anonymous

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When the Godfather or the corner shylock did this it was a crime- now its a big money business :roll:

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Rapid refunds prevalent on Montana's reservations
By BRIAN TUMULTY and FAITH BREMNER Gannett News Service

WASHINGTON — Poor people who live on Montana's seven Indian reservations are using high-interest tax refund anticipation loans, also known as rapid refunds, at a higher rate than anywhere else in the state.

Statewide, nearly 8 percent of taxpayers who are owed a refund from the federal government relied on these loans to get a check within 24 hours or less instead of waiting a week or two for an electronic refund from the IRS.

But on parts of the state's Indian reservations, an average of 21 percent of people who were owed refunds borrowed against those refunds.
The Montana counties where the loans were used the most — Glacier, Big Horn, Roosevelt, Rosebud, Blaine, Hill, Pondera and Lake — are in and around Indian reservations. In Glacier County, home of the Blackfeet Reservation, 35 percent of those who received a federal tax refund in 2004 borrowed against it. In Lake County, home to the Flathead Reservation, 12 percent borrowed against their refunds.
Those findings are based on a Gannett News Service analysis of Internal Revenue Service 2004 tax year data. The data, originally obtained from the IRS by the nonprofit National Consumer Law Center, is the most recent available.

On Indian reservations, most of those refunds are targeted at the low-income workers eligible for the Earned Income Credit, which is meant to help lift workers out of poverty.

Starting in December, tax refund lenders began offering what consumer groups call "holiday refund anticipation loans" or "pay stub loans." That was two months before Tax Help Montana, a nonprofit group that provides free tax preparation services for the poor, got up and running.

The group is holding free tax clinics this year at the Blackfeet, Rocky Boy's, Fort Belknap and Northern Cheyenne reservations as well as 13 other sites around the state.

"(Lenders) tell people they don't have to wait for their W-2s. They'll go off your last pay stub," said Johnel Barcus, executive director of the Browning Community Development Corp., which co-sponsors Tax Help Montana's free tax clinics on the Blackfeet Reservation. "When people are in a bind and in need, they will go to those things, even though they're paying a lot for it. I don't believe they realize it's a high-interest loan."

Education and free tax clinics are key to reducing the number of high-interest tax refund loans, said Karen Heisler, spokeswoman for Consumer Credit Counseling Service in Great Falls.

On top of the interest on the loan, the average person pays $150 to a tax preparer to fill out a simple return, Heisler said. She said her organization is working to line up local banks and credit unions to provide loans next year for a small fee.

"I do believe by next year we'll have some alternative products for people who are low- to moderate-income," Heisler said.

Consumer groups estimate that this year the annual interest rate on a typical refund anticipation loan averaging $2,500 will range from 85 percent at H&R Block to 170 percent for loans at Jackson Hewitt offered through Santa Barbara Bank and Trust. That translates to average fees ranging from $57 to $111.

That's a lot of money in Indian Country, where unemployment is high and consumer goods are expensive, said Barbara Stiffarm, development director for Opportunity Link, a group that fights poverty in northwest Montana.

"People can use that money to bring home to their families ... rather than paying high interest rates," Stiffarm said. "The average median income on Indian reservations in Montana is well below $10,000 annually."

H&R Block declined to comment on the prevalence of these loans on Indian reservations.

Rep. Dennis Rehberg, R-Mont., was surprised to learn that Indians take out such a disproportionately high number of tax refund loans. Rehberg sits on the House Appropriations Subcommittee on Financial Services and General Government, which has jurisdiction over the IRS. He said he'd be willing to consider legislation that would limit interest rates charged on loans to Indians.

Last year, Congress enacted a 36 percent annual percentage rate cap on loans, including tax refund anticipation loans, made to members of the military and their families.

"We have to be careful," Rehberg said. "We do not want to assume that all of the refund anticipation loans are bad.

"We don't want to drive a provider out of the market place that may be providing a service to Native Americans that they may need."
 

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