Why More Than a Million Taxpayers Are Reaching for Refund Loans – By  Bowdeya Tweh March 11, 2017 8:00 a.m. ET

IRS changes designed to prevent fraud leave some filers searching for expected funds

Blank checks on an idle press at the Philadelphia Regional Financial Center in 2008.

Blank checks on an idle press at the Philadelphia Regional Financial Center in 2008.Photo: Associated Press

More than 1.5 million U.S. taxpayers have taken out loans against their anticipated 2016 refunds, fueled in part by the federal government’s delay in disbursing money to certain filers.

Tax preparers are making unsecured loans that are free of interest and upfront fees in an effort to aggressively court customers. The emergence of these refund-advance loans marks a shift away from higher-margin products offered more than a decade ago that were derided by consumer groups, lawmakers and regulators for saddling consumers with excess fees.

This year, the Internal Revenue Service delayed refunds until late February for taxpayers claiming the earned-income tax credit or additional child tax credit, a tactic aimed at reducing fraudulent filings and incorrect refund distributions.

H&R Block Inc. said Wednesday that it has approved 840,000 refund-advance loan applications worth about $700 million this tax season, its first time offering the fee-free product. Meanwhile, Liberty Tax Inc., which runs Liberty Tax Service and SiempreTax+, said Wednesday it had a 40% increase in such refund advance loans from a year ago, rising to 175,000 loans approved as of Feb. 28.

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