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Credit Discrimination: PENNSYLVANIA

Civil Rights: 43 Pa. Cons. Stat. §§ 951 to 963 (housing transactions)

Protected Classes: Race, color, religious creed, ancestry, national origin, sex, familial status, age, handicap or disability (including use of support animal) of applicant or prospective owner, occupant, or user of real property.

Credit Discrimination: PUERTO RICO

Fair Housing: P.R. Laws Ann. tit. 1, § 13(e)

Protected Classes: Politics, religion, sex, race, or color.

Prohibited Practices: Refusing to grant loan for dwelling construction.

Scope of Coverage: Natural or artificial persons engaged in business of granting loans for dwelling construction.

Private Remedies: Aggrieved party may bring civil action for actual damages, and court may award punitive damages. P.R. Laws Ann. tit. 1, § 14.

Credit Discrimination: RHODE ISLAND

Fair Housing: R.I. Gen. Laws §§ 34-37-1 to 34-37-11; R.I. Gen. Laws § 34-37-4(b) (housing transactions)

Protected Classes: Race, color, religion, sex, sexual orientation, marital status, country of ancestral origin, disability, military status, domestic abuse, age, gender identity or expression, lawful source of income, or familial status. § 34-37-4(b).

Prohibited Practices: Directly or indirectly discriminating in the terms, conditions, or privileges relating to obtaining or using any financial assistance.

Credit Discrimination: SOUTH CAROLINA

Fair Housing: S.C. Code Ann. §§ 31-21-10 to 31-21-150

Protected Classes: Race, color, religion, sex, familial status, national origin, or handicap.

Prohibited Practices: Refusing to sell or rent or to negotiate for the sale or rental of a dwelling; discriminating against a member of protected class in terms, conditions, or privileges of sale or rental of a dwelling, or in providing related services or facilities. § 31-21-40.

Credit Discrimination: SOUTH DAKOTA

Civil Rights: S.D. Codified Laws §§ 20-13-1 to 20-13-56; S.D. Codified Laws § 20-13-21 (housing transactions/financing)

Protected Classes: Race, color, creed, religion, sex, ancestry, disability, or national origin of applicant or prospective occupants or tenants of real property to which transaction relates.

Credit Discrimination: TENNESSEE

Civil Rights: Tenn. Code Ann. §§ 4-21-101 to 4-21-1004; Tenn. Code Ann. § 4-21-601 (housing transactions)

Protected Classes: Race, color, creed, religion, sex, disability, familial status, or national origin.

Prohibited Practices: Discrimination in the terms, conditions, or privileges of sale or rental of real property or housing accommodation.

Scope of Coverage: Any person.

Credit Discrimination: TEXAS

Consumer Credit: Tex. Fin. Code Ann. § 341.401 (West)

Protected Classes: Sex, race, color, religion, national origin, marital status, age; income from social security or SSI; exercise of rights under the Federal Consumer Credit Protection Act.

Prohibited Practices: Denying an extension of credit, including a loan, or restricting or limiting the credit extended.

Consumer Credit Regulation: 15.1.1.1 What are RALs?

Refund anticipation loans (RALs) are short-term loans secured by a taxpayer’s expected refund and repaid directly from the proceeds of the refund sent by the Internal Revenue Service (IRS). The mechanism for direct repayment of the RAL is a temporary or “disposable” bank account set up by the lender, into which the IRS is instructed to send the refund. The loans are repaid when the consumer’s refund is direct deposited into that account.

Consumer Credit Regulation: 15.1.3 Refund Anticipation Checks

Related to bank RALs are refund anticipation checks (RACs), also commonly called “refund transfers.” A RAC is a supposedly non-loan product involving a temporary bank account. The bank allegedly does not make a loan, but instead waits until the IRS direct deposits the refund into the disposable bank account set up for that purpose. After the refund is deposited, the bank issues the consumer a check or prepaid card or makes a direct deposit into the consumer’s own account, and then closes the disposable account.

Consumer Credit Regulation: 15.1.4 Tax Refund Assignments

Another form of tax-refund-based lending is the assignment of a taxpayer’s expected tax refund in return for an immediate cash payment.41

Lenders seek to characterize these as the sale of a chose in action, in which the lenders claim that they are buying the borrower’s right to receive the refund. These products are actually disguised loans containing hidden interest in the form of a “discount” from the full value of the refund.42

Consumer Credit Regulation: 15.2.1.3 TILA and RACs

Banks claim that TILA does not apply to RACs, arguing that RACs are not loans because no monies are disbursed until the bank actually receives the tax refund. However, in many cases, consumers purchase a RAC solely for the purpose of deferring payment of the tax preparation fee until the refund arrives. In such cases, the RAC really represents a loan of the tax preparation fee and TILA disclosures should be made if there is a charge to defer payment.

Consumer Credit Regulation: 15.2.1.4 The Federal Rebate Act

The failure of a lender to rebate a portion of the loan fee if the loan is repaid earlier has been challenged as a violation of the Federal Rebate Act.60 However, the Ninth Circuit rejected that theory, holding that a flat-fee charge was not “interest” under the Federal Rebate Act.61

Consumer Credit Regulation: 15.2.2 Military Lending Act

One population that is protected from the high cost of RALs is active duty servicemembers and their families. The John Warner Defense Authorization Act of 2007, also known as the Military Lending Act (MLA), caps rates for loans to the military at 36% APR, including fees and insurance premiums.62 The Department of Defense issued regulations that cover RALs as a form of “consumer credit” which tracks the scope in Regulation Z, implementing the Truth in Lending Act.

Consumer Credit Regulation: 15.2.3.1 OCC Policy Statements

The three largest RAL lending banks during the 2000s—HBSC (formerly known as Household Bank), JPMorgan Chase, and Pacific Capital Bancorp/Santa Barbara Bank & Trust—were all national banks regulated by the Office of Comptroller of Currency (OCC).

Consumer Credit Regulation: 15.2.3.2 IRS Rules on RALs

The IRS has issued a handful of rules governing RALs in IRS Publication 1345, an IRS document that governs providers of electronic tax return filing or “e-file providers,” including the vast majority of tax preparers who facilitate RALs. The IRS requires e-file providers to disclose that:

Consumer Credit Regulation: 15.3.1 State Usury Laws

Despite the high APRs on traditional RALs, state usury claims often ran into the issue of federal preemption/rate exportation.89 All of the major RAL lenders were federally chartered banks or federally insured state banks chartered in states without usury caps.

Consumer Credit Regulation: 15.4.1 Claims Against Tax Preparers

Even if federal regulation of national banks and rate exportation by federally chartered or insured banks limits the ability to raise state law claims against the RAL lender,118 consumers can raise a myriad of state law claims against the tax preparer. For example, the New York State Division of Human Rights investigated H&R Block’s discriminatory targeting of minorities for RALs.119

Consumer Credit Regulation: 15.4.3 Debt Collection Abuses

A significant risk to RAL consumers had been the practice of cross-lender debt collection, where RAL lenders include a provision in their RAL agreements allowing them to take a consumer’s tax refund and use it to pay back any prior RAL debts to any other RAL lender.132 There were several lawsuits filed against RAL lenders and tax preparers over these cross-lender debt collection provisions.133 The California attorney general’s office enforcement actions against the three major tax preparers incl

Consumer Credit Regulation: 15.4.5.1 Sale of Chose in Action vs. Loan

When a tax time financial product is labeled as an assignment of the refund instead of a loan, the lender may argue that as a sale of a chose in action, credit laws such as the Truth in Lending Act and usury laws do not apply.142 Whether such a transaction is subject to credit disclosures and credit regulation depends on whether a court is willing to accept the transaction as the sale of a chose in action, or whether it determines that its substance is really that of a loan.