Refund-anticipation loans take advantage of people.

The law requires full disclosure of all fees and interests, but for people who can’t or won’t wait for their federal tax refunds, the immediacy of walking out with money overrides their own self-interest.

Walk into a tax preparation office, fill out your tax returns with help and walk out with cash. The hitch: The company that helped file your return is taking a big bite out of the money a taxpayer is due back.

In addition to loan fees and other random charges, the quick refunds also require interest payments. Taken altogether, the RALs are nothing more than short-term loans with usurious rates.

According to the National Consumer Law Center and the Consumer Federation of America, in 2003 taxpayers spent more than $1 billion on loan fees and about $389 million in administrative or application fees. If fees are included along with the interest charged on the short-term loans, the effective annualized interest rate can range between 40 percent and 1,700 percent.

The Internal Revenue Service reports that in 2003 about 79 percent of all RAL recipients earned $35,000 or less.

The banks that back these loans face little risk. The money is coming from the federal government and is usually available in as little as eight days.

The temptation for quick money is easy to understand. Cash in hand is often more attractive than a promise of more money later. Just look at Gov. Baldacci’s idea to sell proceeds from 10 years of the state’s lottery – about $400 million worth – for upfront money of $250 million. At least with the governor’s plan, it’s a 10-year loan versus a 10-day one.

Taxpayers considering such a loan should remember one important fact: It’s not a windfall; it’s money that has been overpaid in federal income taxes, an interest-free loan given to the government. Consumers shouldn’t swap significant sums of that money for instant gratification. It’s better just to wait a few more days and collect every dime they’re owed.