What's replacing nasty tax refund anticipation loans?

tax form and refund check

It's tough being a savvy consumer in the United States when the financial deck is so very stacked against us.

Free checking accounts are an endangered species, there's evidence mortgage rates should be lower than they are and it's all but impossible to find a decent savings rate.

But there is at least one pro-consumer bit of news to crow about: It's become much harder to get a Refund Anticipation Loan, or RAL — a predatory loan secured by a taxpayer's anticipated income tax refund.

Watch TV lately?

About this time of year, you're typically assaulted with ads telling you how you can get your tax refund early. Just walk into your big-box tax preparer and grab that check!

But those ads are gone for good this year. That's because the federal government essentially forced the banks backing these loans out of the business, leaving tax preparers without a RAL partner.

This is good news. Most consumers thought they were getting their tax refund early. Instead, they were taking out a one- to two-week loan with APRs averaging 149%, according to the National Consumer Law Center.

High Cost of an RAL

Loan amount Fee APR
$1,500 $61.22 149%

That's a true rip-off.

In 2011, consumers lost $33.7 million through RAL fees, down significantly from their 2002 peak, when 12.7 million taxpayers shelled out $1.1 billion in loan fees.

It was a horrible way to prey on people who needed money fast.

Which is why getting the big tax prep chains out of the business is a good thing. The last bank offering these loans — Kentucky-based Republic Bank & Trust — killed its business after last tax season under an agreement with the FDIC.

Still, this doesn't mean you can let down your guard.

In January, the National Consumer Law Center put out a warning that some lenders they call "fringe" and "shady" are still trying to sell consumers three money-draining products at tax time:

Now, watchdogs like the National Consumer Law Center say these practices won't be as widespread as bank-backed refund anticipation loans once were.

Even so, your best bet is still to get your refund directly from the federal government, no middle man required.