I'm glad that someone has finally stepped in to stop this completely ludicrous practice and I hope that other firms are stopped from offering these ripoffs. Even though stopping RALs is an unambiguously good thing, H&R Block will still be offering RACs backed by their own bank. Here's the company's description of how that works:
For a lot of poorer taxpayers, filing a return is a bonanza due to the Earned Income Tax Credit and Additional Child Tax credit, which are basically social welfare disbursements. The only way to get the sometimes multi-thousand dollar payments is by filing a return and this is where preparers get to skim a little off the top. But the skimming doesn't just stop with return preparation. Let's say you don't have direct deposit (or a bank account). Then you can get your RAC on the Emerald Card. Sounds swanky, right? Swanky and way beneficial to banks! Here's a neat feature:
Stories like this convince me of a few things. 1) The government, if it's going to keep an income tax, needs not only a simpler tax system, but needs to stop distributing social welfare payments through the IRS. It's just allows too much predation. Maybe it can just collect the information on the return and sporadically mail out payments- I don't know. 2) Poor people need better access to banks and credit. Same-day check cashing outfits, prepaid debit cards and all of that kind of nonsense is a massive transfer of wealth from those who need it most. It's disgusting and the government ought to do something about it. I think maybe a smaller, more progressive state should try to get into the banking business (at least from transactional credit and small-time checking/savings operations) and we'll see if a pilot program could lead to larger adoption. I don't know enough about law or finance to know if this is legal or feasible, but I think it's a worthwhile aim to reduce transaction costs as a way of promoting overall social welfare.**ATM owner may charge an additional fee.