To the Editor,

A recent study by First Nations Development found that some tax preparers encourage taxpayers to take out high-cost loans against their tax refunds and to sign up for costly bank products.

Some tax preparers use misinformation to manipulate clients into signing up for costly products. When taxpayers “buy into” the RACS and RALS, they then learn that they cannot receive direct deposits into their bank accounts without paying a fee. When taxpayers are not informed of the consequences of the RALS and RACS, some tax preparers automatically enroll them into these products with their applications without a full understanding by the taxpayers. Other loans are also offered by consumer loan companies or pawnshop-type businesses.

Some tax-preparation firms employ a variety of techniques to urge people to use these credit products and then squeeze even more revenue out of borrowers, those who do not have cash on hand to pay for tax preparation. Once a taxpayer takes out a loan, the tax-preparation fees are often rolled into the cost of the loan and increases the principal upon which interest is charged. The end result is that some tax-preparation firms prey on low-income populations and this constitutes predatory lending.

Tax-preparation firms can provide a valuable service and taxpayers should search out reputable firms that have established their businesses over time in the area — not those who come in at tax time and then leave the area and leave folks in debt and having to pay high fees.

The North Carolina Benefits Bank trains nonprofits in assisting low income families in tax preparation at no cost. This organization has recognized similar problems and has established this program for consumer protection. Nonprofits interested in training to assist low income populations may contact NC Benefits Bank. The following locations provide tax filing services without cost: Sacred Pathways in Pembroke, 910-521-2685; the following offer services but by appointment only: Vision Education Center, Dillon, S.C., 864-567-3744; Center for Community Action, Lumberton, 910-739-7851; and Rockingham District Partners in Ministry, Laurinburg 910-268-4688.

Ruth Dial Woods

Project director

Sacred Pathways Inc.