Senate Commerce Committee Statement to Senate, No. 4240 — State of New Jersey (December 6, 2021)

Summary

The Senate Commerce Committee of the State of New Jersey, in a statement dated December 6, 2021, reports favorably Senate Bill No. 4240. The bill prohibits tax preparers from requiring clients to enter into a refund anticipation check agreement in order to complete a tax return. Preparers may not advertise refund anticipation loan or check services as "free," "no cost" or "no fee" when those services result in higher fees for other services. Preparers must give an itemized statement of service charges, fees and interest, including estimated interest if a refund is delayed. The statement says many tax preparers offer such loans and checks at exorbitant interest rates, and violators are subject to the Consumer Fraud Act.

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SENATE COMMERCE COMMITTEE

STATEMENT TO

SENATE, No.
4240

STATE
OF NEW JERSEY

DATED: DECEMBER
6, 2021

The Senate Commerce Committee reports favorably Senate
Bill No. 4240.

This
bill prohibits tax preparers from engaging in certain practices involving
refund anticipation checks and loans.

An
income tax refund is the largest lump-sum payment that many residents in the
State receive in a given year, and many tax preparers take advantage of this
fact by offering residents—particularly low-income residents—refund
anticipation loans and checks at exorbitant interest rates or with other
exploitative practices. Under this bill, tax preparers will be prohibited from
requiring clients to enter into a refund anticipation check agreement in order
to complete a tax return. Tax preparers will also be prohibited from providing,
offering, or advertising refund anticipation loan or check services using terms
such as “free,” “no cost,” “no fee,” or other language that would lead a client
to reasonably believe that the refund anticipation loan or check is provided at
no cost to the client if the issuance of a refund anticipation loan or check
results in, or is predicated upon, the assessment of higher or additional fees
for other tax preparation or other services than are charged to clients who do
not receive refund anticipation loan or check services.

Additionally,
tax preparers will be required to provide an itemized statement of any service
charges or fees for providing or facilitating a refund anticipation check and
any interest charged, including the estimated amount of interest in the event a
refund is delayed, under the terms and conditions of a refund anticipation loan
or refund anticipation check. Tax preparers who violate any of the provisions
of this bill will be subject to the Consumer Fraud Act. As used in this bill,
“refund anticipation check” means a check, stored value card, or other payment
mechanism representing the actual or anticipated proceeds of the client’s
federal or State income tax refund which was issued by a depository
institution, tax preparer, or other person that received or anticipates receipt
of a direct deposit of the client’s federal or State income tax refund and for
which the client has paid a fee or other consideration for such payment
mechanism.

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