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Consumer Credit Regulation: 15.4.5.2 Where Consumer Liable for Shortfall in the Refund

A key indicator that an assignment may in fact be a loan is if the transaction requires the consumer to repay the lender if the government fails to pay the full refund.148 Either the lender will be paid the principal plus interest by the IRS’s payment of the refund or the borrower will pay that exact same amount. There is no uncertainty in the amount of the payment. Neither the repayment itself nor the amount of the repayment is contingent upon a future event.

Consumer Credit Regulation: 15.5.2 FDIC’s 2011 Action Against Republic Bank

In February 2011, the FDIC notified Republic Bank that the practice of originating RALs was unsafe and unsound.164 The FDIC’s action was based on the IRS’s decision to stop providing the debt indicator, a service that helped tax preparers and banks make RALs by acting as a form of credit check.165 In response, Republic announced its plans to appeal the FDIC’s decision166 and filed a lawsuit against the FDIC.167

Consumer Credit Regulation: 15.5.3 CFPB Action Against Southwest Tax Loans

The Consumer Financial Protection Bureau (CFPB), in conjunction with the Navajo Nation, took an enforcement action involving RALs against Southwest (S/W) Tax Loans, a non-bank lender, and four H&R Block franchises that worked in partnership with this lender.173 The CFPB alleged that these defendants illegally schemed to steer low-income citizens of the Navajo Nation into taking out high-cost RALs.

Consumer Credit Regulation: 15.6.1 State Enforcement Actions

Over the decades, state regulators, enforcement agencies, and municipal regulators have all taken actions against tax preparers over RALs, RACs, and other tax-related consumer issues. In the 1990s, state attorneys general sued preparers over deceptive advertising of RALs.186

Consumer Credit Regulation: Alabama

Ala. Code §§ 5-19-1 to 5-19-33 (Consumer Credit Transactions Law “Mini-Code”).

Scope: Credit transactions in which the party to whom credit is extended is a natural person and the money, property, or services are primarily for personal, family, or household purposes. Some lease transactions. Non-consumer transactions of less than $2,000 are subject to Act’s finance charge limits only. § 5-19-1. Note that the Mini-Code is broader in scope than most state RISAs and is applicable to a wide range of consumer credit transactions.

Consumer Credit Regulation: Alaska

Alaska Stat. §§ 45.10.010 to 45.10.230 (Retail Installment Sales Act).

Scope: Installment sales of goods or services for personal use from a retail seller under an installment contract or charge agreement including repairs or improvements of real property, but not services of a professional licensed by the state, or some services for which the price is determined or approved by a governmental entity. § 45.10.220

Licensure requirements: None.

Credit terms: The rate agreed upon by the retail seller and the buyer. § 45.10.120.

Consumer Credit Regulation: Arizona

Ariz. Rev. Stat. Ann. §§ 44-6001 to 44-6006 (Retail Installment Sales Transactions).

Scope: Installment sales of tangible chattels, except motor vehicles, money, things in action, or intangible personal property. Includes fixtures and merchandise certificates or coupons issued by a retail seller that are not redeemable in cash and to be used in the face amount instead of cash for goods or services sold by such seller. Revolving credit. Services. § 44-6001.

Licensure requirements: None.

Consumer Credit Regulation: California

Cal. Civ. Code §§ 1801 to 1812.20 (West) (Retail Installment Sales “Unruh” Act).

[Not to be confused with the “Unruh Civil Rights Act,” Cal. Civ. Code §§ 51–53 (West)]

Consumer Credit Regulation: Colorado

Colo. Rev. Stat. §§ 5-1-101 to 5-9.5-109 (Colorado Uniform Consumer Credit Code).

Scope: All creditors extending consumer credit except lessors and specified exclusions. § 5-1-107.

Licensure requirements: None.

Consumer Credit Regulation: Connecticut

Conn. Gen. Stat. §§ 36a-770 to 36a-788 (Retail Installment Sales Financing).

Scope: Installment sales of consumer goods and motor vehicles (having an aggregate cash price of $50,000 or less) and equipment. § 36a-770.

Licensure requirements: None.

Consumer Credit Regulation: Delaware

Del. Code Ann. tit. 6, §§ 4301 to 4351 (Retail Installment Sales Act).

Scope: Installment sales of goods for personal, family, or household use or furnishing of services (not commercial or business use). Revolving credit. § 4301. Act does not apply to any retail installment sale made for a cash sale price of $75 or less where no title, lien, or other security interest is taken by the seller. § 4302.

Licensure requirements: None.

Credit terms: Rate established by contract. § 4315.

Consumer Credit Regulation: District of Columbia

D.C. Code §§ 28-3801 to 28-3819. See also D.C. Mun. Regs. tit. 16, §§ 100 to 199.

Scope: Consumer credit sales, defined as sale of goods or services for personal, family, household, or agricultural purposes in which seller/creditor regularly engages in such transactions, buyer is natural person, debt is payable in installments or a finance charge is imposed, and amount financed does not exceed $25,000. Some provisions apply to direct installment loans. §§ 28-3801, 28-3802.

Consumer Credit Regulation: Florida

Fla. Stat. §§ 520.30 to 520.42 (Retail Installment Sales Act). See also Fla. Admin. Code Ann. r. 69V-60.001.

Scope: Goods purchased primarily for personal, family, or household use, but not including motor vehicles, and services for personal, family, or household use on goods and real property. Revolving credit. § 520.31.

Licensure requirements: Retail sellers engaging in retail installment transactions must be licensed.

Consumer Credit Regulation: Georgia

Ga. Code Ann. §§ 10-1-1 to 10-1-16 (Retail Installment and Home Solicitation Sales Act).

Scope: Installment sales of goods (other than motor vehicles) and services for personal, family, or household use on goods, including delivery, installation, and repair. Revolving credit. § 10-1-2.

Licensure requirements: None.

Consumer Credit Regulation: Idaho

Idaho Code §§ 28-41-101 to 28-49-107 (Credit Code).

Scope: Sellers of goods or services, small loan companies, licensed lenders, finance companies, sales finance companies, industrial banks and loan companies, and commercial banks. § 28-41-107.

Licensure requirements: None.

Credit terms: Rate established by agreement of the parties. § 28-42-201.

Restrictions on points or prepaid interest: None.

Restrictions on length of term: None.

Consumer Credit Regulation: Illinois

815 Ill. Comp. Stat. 405/1 to 405/33.1 (Retail Installment Sales Act).

Scope: Installment sales of goods (including manufactured homes that are not real property, but not including motor vehicles) used or purchased primarily for personal purposes and services of any kind rendered or furnished by a retail seller for a use other than in business (including farming or a profession) under an installment sales contract or charge agreement. 405/2.1 and 405/2.2.

Consumer Credit Regulation: Indiana

Ind. Code §§ 24-4.5-1-101 to 24-4.5-7-414 (Indiana Uniform Consumer Credit Code).

Scope: Retail installment sales (other than sales of goods, services, or an interest in land in which they are purchased primarily for a purpose other than a personal, family, or household purpose), consumer credit, small loans. § 24-4.5-1-202.

Licensure requirements: None.

Consumer Credit Regulation: Iowa

Iowa Code §§ 537.2101 to 537.8101 (Iowa Consumer Credit Code).

Scope: Consumer credit transactions, including sales and loans. § 537.2102.

Licensure requirements: None.

Consumer Credit Regulation: Kansas

Kan. Stat. Ann. §§ 16a-2-101 to 16a-9-102 (Kansas Uniform Consumer Credit Code).

Scope: Consumer credit transactions, including sales and loans. § 16a-2-102.

Licensure requirements: None.

Credit terms: In a closed-end consumer credit sale, a seller may charge a finance charge at any rate agreed to by the parties. § 16a-2-201(2). In a consumer credit sale made pursuant to open-end credit, a seller may charge a finance charge at any rate agreed to by the parties. § 16a-2-202(1).

Consumer Credit Regulation: Kentucky

Ky. Rev. Stat. Ann. §§ 371.210 to 371.330 (West) (Installment Sales Contracts).

Scope: Installment sales of goods (not including motor vehicles) and services purchased primarily for personal use pursuant to retail installment contract or retail charge agreement. § 371.210.

Licensure requirements: None.

Credit terms: A retail charge agreement may charge a time price differential for the privilege of paying in installments. § 371.300(3).