High interest “tax refund anticipation” loans are popular with many people who need money fast. But they are most popular with people living on 4 Indian reservations in South Dakota.

Some of these loans are taken out prior to even preparing tax returns, in December, and based on paycheck stub information which they use to calculate the anticipated refund. Many use this as a way to get extra money for Christmas and later must go back and pay the preparer up to $150 additional to file their taxes.

The IRS has decided to block tax preparers who offer free services through the IRS Free File program from offering refund anticipation loans, but the same tax preparers offer them at their branch offices.

Tax refund anticipation loans popular on state’s reservations

The Federal Trade Commission has filed a complaint against a scheme calling itself “America’s Premier Debt Consolidation Company” for violating the FTC Act and the FTC’s “Telemarketing Sales Rule”.

According to the complaint,the defendants have violated the FTC Act and the TSR by falsely claiming that they are a nonprofit entity; that the only cost for their services is a monthly administrative fee that is less than $49 and/or that there is no application fee; that their services will result in estimated savings of a specified amount, typically several thousand dollars; and that their services will reduce the consumer’s monthly payment or total debt, or will improve their credit rating. In fact, the complaint states, in addition to a monthly administrative fee, the defendants charge a fee equal to the monthly payment, which is collected from the consumer’s first payment; they overstate the estimated savings, if any; their services do not necessarily reduce the consumer’s monthly payment or total debt; and they do not provide any service to improve, or prevent deterioration of, a customer’s credit record, history, or rating.

The defendants used recorded messages delivered to answering machines stating “We are a nonprofit agency that can consolidate your credit cards, lower your monthly payments dramatically, and reduce your interest rates down to as low as 1.5 percent.”

The defendants also use mail and Web sites (www.expressconsolidation.org and www.expressconsolidation.com) to get consumers to contact them, the complaint alleges.

The defendants are attorney Randall L. Leshin, P.A., d/b/a Express Consolidation, Express Consolidation Inc., and Consumer Credit Consolidation Inc. and its president, Maureen A. Gaviola. The Commission vote to authorize staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the Southern District of Florida.

The American military is reporting in increase in the numbers of soldiers denied security clearance because of debt and financial problems.

Topping the list of debt problems were “payday loans”. Because military pay is so low, soldiers and their families facing unexpected expenses often find the only solution is a loan. The interest on these loans is so high, that they create financial hardship of their own when the soldiers don’t have the funds to repay them.

Payday loans offer quick cash advance loans to borrowers against their next paycheck, with exorbitant interest rates. The rates can be as high as a 390% APR annually.

President Bush signed legislation October 19 that would cap the interest rate these lenders are allowed to charge military personnel at 36%.

It can be a sound idea to transfer balances from credit cards with high rates to a new card that offers a super-low rate on balances transferred from other accounts. But make sure you understand what to look for.

Pay attention to how long the initial rate lasts. Be aware that not everyone will qualify for the lowest rate advertised and your introductory rate could be higher. Know what the regular rate will be once the introductory rate period is over and if that low rate will apply to new purchases as well or only to the balance transfers.

Is the special rate for initial transfers only? If this is the case, then only the accounts specified when you first apply for the card qualify for the special low-rate and subsequent transfers may be treated as cash advances – in which case you could pay a hefty cash advance fee and a higher rate of interest.

Check into the late-payment and over-limit fees. Will a late payment cancel the low-rate and make your balances subject to a higher interest rate? Some card companies will raise your rate even if you are late making payments on another credit card account.

If you do transfer balances to a new card, avoid the danger of late-payment fees on the old account by continuing to pay on the old account until you have proof it is at a zero balance. Then you may cancel it and close the account.