Bailout Plan Hits the Poor: Banks Are Using TARP Funds to Make Predatory Loans

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WHEN CONGRESS HASTILY created and passed the Troubled Asset Relief Program (TARP) last fall to bail out the financial sector, the program didn't offer any consumer protection against the type of predatory lending practices that led to the financial crisis. It came as no surprise, then, when Santa Barbara Bank & Trust, a self-described "community bank" in California, announced in January that it was intending to use its $180 million in bailout money to make high-priced refund anticipation loans, known as RALs.

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RALs are short-term loans borrowed against a consumer's tax refund. They're often advertised as "quick cash," because they allow …