First Nations to Present Recent Findings on Predatory Lending

On September 26, 2012, First Nations Development Institute consultant Shawn Spruce will appear in front of New Mexico’s Indian Affairs Committee to discuss tax time predatory lending practices. The meeting, at the University of New Mexico-Gallup, is to make key legislators and tribal leaders (as well as tax-preparation businesses) aware of how firms take advantage of Native American taxpayers within and around communities with high Native populations.

Consistent with First Nations’ mission to advocate for Native peoples, Spruce will emphasize the need for consumer protections for Native American taxpayers and enforcement of existing legislation, since some tax-preparation firms are exploiting Native American taxpayers. In his presentation, he will draw primarily on data collected by First Nations that captured the experiences of Native American filers at for-profit tax-preparation businesses in New Mexico. With support from the Annie E. Casey Foundation and W.K. Kellogg Foundation, First Nations carried out a “mystery shopper” study in New Mexico this past tax season, which culminated in a report titled More Tax Time Troubles (publication forthcoming).

The comprehensive report highlights a number of deceptive practices and poor quality preparation that Native tax filers encountered. The most troublesome finding was that some tax preparers manipulate clients into signing up for costly products like the Refund Anticipation Check (RAC) or Refund Anticipation Loan (RAL). Three of the 10 participants in our 2012 study were automatically signed up for the RAC option by way of questionable methods used by the preparers. Furthermore, seven of the 10 were offered a RAL loan and all 10 shoppers had some type of exposure to this expensive option through aggressive marketing.

Spruce will present at length about one shoppers whose experiences were especially problematic. One tax-preparation firm made a refund anticipation loan to our mystery shopper several days after the IRS website indicated that her refund had been issued to the firm. She was later told that the refund was, in fact, deposited in the firm’s account on the IRS indicated date, but that they only have one person who processes checks and it had taken that long to cut a return check. This ordeal resulted in the mystery shopper filing a formal complaint with the New Mexico Attorney General’s Office.

Sarah Dewees, First Nations’ senior director of research, policy and asset-building, said, “We acknowledge that tax-preparation firms can provide a valuable service, but we expect them to act ethically and in the best interest of their customers. Our research suggests this is not always the case, and instead tax preparers are taking advantage of some Native American tax filers.”

She continued, “This presentation before the Indian Affairs Committee will be crucial to fight for consumer protections for Native Americans. Our More Tax Time Troubles report will provide legislators and tribal leaders with solid evidence that predatory lending continues to be a problem in many New Mexico communities.”

The More Tax Time Troubles report will be available in October 2012. Please check www.firstnations.org for updates on its release.

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