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Refund Advances Are Back... But At What Cost?

Payday loan companies hurt the consumer by creating a spiral of debt.

Competition is a very funny thing. It has the ability to shift mentalities, embrace change, and push your work ethic. In fact, your work ethic is the only thing you have absolute control over. Nothing else. It requires sacrificing your energy and time to be your best self, thus giving you more tools to compete. Unfortunately, competition can also show a different side. The importance of competing and staying relevant sometimes forces us to make rash decisions, disregarding how it affects the people around us. It resembles taking performance enhancing drugs in sports or using insider trading information on the Wall Street trading floor. Competition should always reflect a positive outcome, not one that causes disbelief.

In the same respect, refund advances have forced bank product providers to compete at all costs. From a business decision, it makes sense. But at what cost to consumers? Those outsourcing refund advances to payday loan companies aim to perpetuate a downward spiral of debt for consumers. If that’s the case, where would you rank outsourcing advances to payday loan companies in relation to insider trading or banned substances? It all sounds the same to me, but I’ll certainly let you decide.

So, now that most companies have adopted a refund advance product, are they all the same? Let’s take a look at what the unfortunate side of competition looks like, and you can answer the question yourself.

First, tax professionals should have an understanding of who’s lending your clients money. If it’s in small print, there’s probably a reason why. You would think they’d advertise any collaboration with excitement, like some of their other partners, but they don’t. Maybe we’re being too cautious. Or maybe we read the small print and need to share what’s being hidden.

Here’s the headline: Companies are offering refund advances at no cost to the taxpayer, and the tax professional is charged a fee. Fortunately for you, now you know to question where it’s from and how they operate. Let’s take a look at who EROs may be indirectly working with. I say indirectly because your bank product provider clearly doesn’t want to let you know by putting it in small print.

Payday loans work in that they allow you to receive a loan that must be paid back with interest. Simple enough...right? Hold on. What’s the time frame to pay back the loan? Here’s the interesting part. Payday loans often work like a two-week advance on a paycheck, as a quick fix. When they’re unable to pay the loan in the allotted time, they have to renew, thus creating a cashflow nightmare and high interest rates. Ok...here’s why this is relevant to your business.

Taxpayers look forward to their tax refund every year, especially if they can receive an advance. What do you suppose payday loan companies will do with the information of your clients after they receive their advance? Are you to assume that it ends there? Your clients will be bombarded with people trying to offer a payday loan, loans that will undoubtedly have high interest rates. Some of your clients are smart enough to realize the harmful effects, others will fall to the pressures of monetary constraints. Do you know what happens when bank branches close down in poor neighborhoods? I’ll tell you.

Payday loan companies happily move in with the intent of preying on people’s weakened financial situation. Taxpayers depend on you to help them make smart financial decisions, and you depend on them to help grow your business. Think about that relationship before you inadvertently put your clients in a terrible position.

Another thing to consider are prepaid cards, the ones you pick up at convenience stores next to the Skittles (I love Skittles). In the beginning of the post, I mentioned the two sides of competition. One favors change based on necessity, the other because they need to stay relevant. If companies were concerned for progression and listened to people’s needs, than why are they offering prepaid cards as a sole disbursement method for refund advances, when approximately 1 percent of people choose prepaid cards as a method to extract payment? In fact, about 50% of taxpayers prefer checks, a pretty alarming difference.

Woah...so you’re telling me we KNOW taxpayers prefer checks, and some companies still decided to utilize prepaid cards? Could there be a hidden motive? Or just those pesky fees? Should tax professionals be concerned?

We’re huge proponents of keeping things transparent and finding innovative ways to compete. Refundo’s NOW advance embodies the spirit of good competition and aims to fill a void in your client’s lives, while helping tax professionals stay relevant in the industry. The NOW advance is the only proven refund advance in the entire industry. Why? We listened and we delivered. We didn’t just have a random announcement and claimed to help grow your business and your clients. It took years of planning and developing the right tools for it to work. What we have now are companies that are more concerned with a quick fix than actually taking the time to improve your workflow. Your business.

We’ll keep finding ways to improve your business, I just hope you don’t have to waste your time with unthoughtful imitations. We are flattered though (blush). 

Topics: tax professionals, Refundo NOW, refund advance