On May 19, Colorado Governor Bill Ritter signed HB 10-1400, a bill that creates protections for Colorado consumers seeking refund anticipation loans (RALs). RALs are loans made based on a borrower’s anticipated income tax refund. The bill establishes the Refund Anticipation Loan Act (RAL Act), under which:

• Individuals offering tax refund loan services must be employed directly by an electronic return originator;
• Loan facilitators must provide specific oral, written and posted disclosures that communicate, among other things, (i) a schedule of fees and example interest rates for different loan amounts up to $5,000, (ii) the duration, amount, applicable fees and interest rates associated with the anticipated tax refund loan, and (iii) procedures for making a complaint about the tax refund loan; and
• A willful violation of the RAL Act is a misdemeanor punishable by a $500 fine and/or imprisonment for up to one year.

The RAL Act becomes effective August 11, 2010.