Rip-offs

The winter weather kept me indoors most of the day, and I spent some of the time reading articles in the Sunday newspaper my mother-in-law sent over. I should be used to the way things are, but I can still be amazed by how much the national economy depends on consumer stupidity and willingness to be fleeced.

Exhibit I was an article discussing so-called RALs (refund anticipation loans). I've been completing my own tax returns for years, and I wasn't familiar with RALs. Apparently a lot of companies specializing in the preparation of tax returns would arrange loans enabling the filer to borrow the amount of the IRS refund due. This apparently appealed to people who couldn't wait a week or two for the government's check and were willing to pay as much as 70 percent in combined interest, fees, and service charges to get the money right away. Companies like H&R Block rake in millions every year in this scam, and the feds have been implementing policies and procedures which have had the effect of shutting down the practice. Wall Street is getting pissy since this will reduce the earnings of the tax preparation companies.

Exhibit II was an article about extended warranty coverage. Unlike RALs, I do know something about extended warranty plans since I've bought several laptop computers and a widescreen TV recently. I made the mistake of buying an extended warranty on one of my cars many years ago. It was money pissed down a rathole, and I learned my lesson. The article pointed out (and I agree) that it would be smarter to set aside the amount of cash it would cost to buy the extended warranty, and save it for emergency repairs. If the product didn't need any repairs, the consumer rather than the warranty company would have the cash.

Refund anticipation loans and extended product warranty plans have been generating millions (maybe billions) in profits for the companies that offer them, reminding us that in the American system of free enterprise there are many perfectly legal ways to separate fools from their money.