Experts: Beware of Tax Refund Anticipation Loans

"Too many working families are susceptible to predatory lending because they are left out of the financial mainstream," Akaka said in a statement. "Many of the unbanked are low- and moderate-income families that can ill afford to have their earnings unnecessarily diminished by a reliance on high-cost and often predatory financial services."

In addition, his bill would end the Debt Indicator program, which shares extensive personal information of taxpayers with tax preparers, and it would prohibit mandatory arbitration clauses for solving problems with RALs. It also would require the Treasury Department to help low- and moderate-income taxpayers to open a low-cost direct deposit account that can be used for refunds from electronic filing.

Berube said an aspect of the legislation that deserves further consideration is the IRS' role in facilitating these loans. Preparers contact the agency before they make a loan to see if the borrower has any outstanding debt that could cause a refund to be offset, such as back taxes or student loans that are owed to the federal government. "So in effect, the IRS is giving tax preparers this product that enables them to make these loans with really no associated risk," he said.

CDF supports Akaka's bill, and it also is working within low-income communities to steer taxpayers to free tax assistance through Volunteer Income Tax Assistance sites, which offer IRS-trained preparers who work with those qualifying for the EITC.

"Taxes are threatening to people," Cooper said. "They're confusing to people. They just do what they're told. They don't really realize they should have the same kind of attitude as if they're going into a used car dealership … they get as much money out of you as they can."