Why is Johnson using his considerable fame and influence to peddle tax anticipation loans to poor people?
From HuffPo:
If you watched the NCAA basketball Final Four, you couldn’t miss former Michigan State star Earvin “Magic” Johnson. He was constantly being interviewed or shown on camera.
There is another place you can find Magic Johnson: doing commercials for Jackson Hewitt’s “Money Now.” “Money Now” is a tax refund loan operation.
Tax refund loans (also called refund anticipation loans) are in a class of financial products marketed primarily to poor people.
Someone described tax refund loans as a payday loan guaranteed by your tax return.
That hits the nail on the head.
Like payday loans, the fees and interest rates on tax refund loans are outrageous.
According to the San Francisco Chronicle, the annualized interest rate for tax loans is 40% to 500%.
According to IRS data, 8.7 million people took out a tax refund loan in 2007. Of those 8.7 million who got the loans, 67% received an Earned Income Tax Credit.
The Earned Income Tax Credit is a program aimed to help the working poor. Only 17% of all taxpayers get it.
When 2/3 of the borrowers come from less than 1/5 of the population, it doesn’t take a genius to see the business model. Tax refund loan vendors must view the working poor as easy pickings.
They are probably right. READ MORE…
Photo: Wireimage/Getty
