Best To Wait For That Tax Refund

As the primary breadwinner for a growing family, Tampa grandmother Denise Hylton needed her tax refund, and needed it now, for a number of reasons, like paying bills, catching up on her mortgage payment and buying food.

Ads like those offering quick access to that money led Hylton to H&R Block, where she took out a refund anticipation loan. But as CBS News Correspondent Cynthia Bowers reports, when Hylton got the check it was nowhere near what she'd expected. Much of her refund had been eaten up by an 88 percent interest rate. She felt taken.

When she looked down and saw 88 percent she says she nearly fainted.

"I was like, 'Oh my God, you took all of this from me. Why? You didn't tell me you were going to do this to me,'" says Hylton.

Hylton says she was never told this was a third party loan, which meant the bank fee was tacked on to H&R Block's fees for tax preparation, electronic filing, setting up a bank account and the finance charge. When everything was added up, Hylton's $4,300 refund had dwindled to $3,800. Getting her money just a few weeks early had cost her $500.

One in 10 American taxpayers now choose the refund anticipation loan option. And nearly half of those 13 million are H&R Block customers. The tax giant insists it doesn't push this particular option. H&R Block wouldn't talk to CBS on camera, but the company that services its loans defended the fees.

Patrick Cozza, CEO and managing director of Household International's refund lending business, says he doesn't believe the rates and fees are too high.

"If you take a cash advance on a credit card, the total fees that you'll pay for that advance are the same or more than the fees you pay for a refund anticipation loan," says Cozza. "Eighty percent of our customers come back every year."

And that's a problem for consumer groups, like the American Association of Retired Persons.

"They're targeting people who are least able to afford the high rates, and they're put on what referred to as a debt treadmill," says Deborah Zuckerman, an attorney with the AARP.

But not Hylton - not anymore.

"I'll tell anybody out there, 'Do not go RALS, wait for your money,'" says Hylton. "Hang on."

Because, she says, when it comes to tax refunds good things come to those who wait.