Let me tell you a story about something that happened years ago, and you can draw your own conclusions as to what the moral of the story is, girls and boys:
In the earliest days of e-filing of tax returns, about 25 or so years ago, I worked in an office that did this. We also offered “loans” against the anticipated refund the taxpayer was expecting. They were called “loans” because they were based on the taxpayer’s credit– essentially, offhand we had no way of knowing, when the taxpayer walked in, whether they might have the sort of debts that could result in the refund being garnished to pay those debts. Now, 99% (perhaps a slight exaggeration, but not by much) of all taxpayers would not have such debts, and we could easily absorb the loss if we “lent” against such refunds that never came. We could cover ourselves by saying that in case the refund didn’t come, they still owed us on the loan and we could seek to collect from them, but in reality that would have been more trouble than it was worth. Maybe some taxpayers knew that and maybe some didn’t. If it dissuaded someone from looking for the “loan,” then all well and fine for all concerned. Nobody has a “right” to a “loan” against their refund, and we haven’t deprived them of anything.
Now, some people would ask me, “Who are the people that are willing to pay a vigorish, in terms of a lower payment than the full amount of the refund, just to get it a few weeks sooner?” and I would tell them, “People that need the money in a hurry. Mine not to ask why. None of my business.” “But aren’t you exploiting them, in a way?” “I haven’t forced them to seek an advance against a wad of cash they’re expecting, nor did I force them to incur the debt they’re looking to pay off by having cash in hand quicker. They’re adults and can make these decisions for themselves.”
Well, wouldn’t you know but what some Dem politician took umbrage at the whole idea of advances against tax refunds, and alleged that we were loan sharks, because if you took what the amount of the service charge was, and applied it against some of the smaller tax refunds we were advancing against, the “interest rate” was like in the thousands of percent. (a bit of hyperbole there). We countered that we were not doing things like payday loans– we charged one fee, the same fee, one time, and when WE received the actual refund and deposited it to our own account, there was an end of things for tax year 199X.
What happened was that as a result of this politician’s allegations, we decided that the “full disclosure” we would do, for all potential users of our service, was “What you are doing in actuality is selling us the right to cash your refund check. You are ‘selling receivables,’ something businesses do every day of the week. It is called a ‘loan’ because we take your creditworthiness into account, and under Federal and State Law we must advise you of this fact. But having sold us the right to cash your check, assuming your check isn’t otherwise intercepted, you are finished with us. We will not ask you for another penny. If you are satisfied with these terms, we can proceed to do business now, and you can pick up your check in 24 hours.”
When people realized that what the Dem politician was saying was merely “scare tactics,” they were somewhat more at ease with the transaction.
We may technically not have been in full compliance with what the Dem politician would have liked, but when people were explained what the SUBSTANCE of the transaction, and the choice they were making, was, few people objected. PS, the Dem politician was just “woofing”– he had NO intention of really trying to close down the refund-loan business. Too many of his constituents would have been hurt thereby, especially the ones who, because of the Earned Income Tax Credit, were getting a fairly good chunk of change. Mr. Pol just wanted to be seen “standing up for the ‘little guy’,” without, y’know, DOING anything.
Now, I had been fairly conservative/moderately libertarian already, but if I hadn’t been, this sort of incident would have turned me into one.
That’s my story. You work out what the moral, if any, is.
