Earlier this year, the AICPA urged Congress to restrict or ban Refund Anticipation Loans. There are a lot of sins associated with RALs. But it's a system to fix, not junk.

The anti-RAL position was taken in testimony given before the Senate Finance Committee this summer by Robert A. Zarzar, chair of the AICPA's tax executive committee, regarding the Tax and Administration and Good Government Act, which is awaiting action by House and Senate conference committees to iron out difference.

"Congress and the IRS are rightly concerned with the high error rate associated with EITC claims and with the proliferation of high-interest, short-term refund anticipation loans," Zarzar's statements noted, in suggesting an outright prohibition on RALs.

I know the standard line on refunds and RALs. Many CPAs believe that if they do their jobs correctly, the clients won't get refunds. And RALs come with exorbitant interest rates paid by taxpayers. So go the arguments.

It's not a matter of whether things should be this way or not. The problem is that many individual taxpayers don't think that way. Given a $1,200 refund--$100 a month split between two checks--most spend the money. They don't save it. Income tax refunds amount to enforced savings for millions who use the government as a Christmas Club account. The lost interest isn't that big and people just like getting that lump sum. Opportunity costs don't figure into this judgment.

RALs work differently. They are for people who need money quickly--people who may not have access to bank accounts, people used to paying money for check cashing. In many ways, the position many CPAs take on these issues aren't matters of the way business should be done, they are middleclass value judgments that the holders cannot see. I suspect this is why the H. &R. Blocks, Jackson Hewitts, and Liberty Taxes Services of the world exist--they can address the different cultures, a battle CPAs lost a long time ago.

There should be guards against fraud and against exorbitant charges. But to argue that there should be no RALs? Given the banks supporting them, they aren't going away.

Nor should they.

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