H&R Block has agreed to a $4.85 million settlement with California Attorney General Jerry Brown, and to stop marketing refund anticipation loans as early tax refunds.
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"This settlement prevents H&R Block from marketing high-cost loans as early tax refunds," said Brown in a statement. "This is especially important because often these loans go to those who can least afford them."
Brown (pictured) filed suit against Block in early 2006 regarding its marketing and sale of income tax refund anticipation loans and a related product called refund anticipation checks.
H&R Block continues to deny any wrongdoing. During the course of the investigation, Block has worked with the Attorney General's office to improve its practices. The complaint alleged a variety of deceptive practices by H&R Block, including:
• Deceptive advertising designed to disguise refund anticipation loans, which carry fees and other costs, as tax refunds, which the IRS provides without charge; and,
• Unfair debt collection practices by which customers' refund proceeds were garnished to pay off debts they supposedly owed.
The settlement provides for up to $2.45 million in restitution for consumers who purchased a "refund anticipation loan" or a "refund anticipation check" through Block between Jan. 1, 2001, and Dec. 31, 2008. H&R Block will also pay $500,000 in penalties and $1.9 million in fees and costs.
In addition. H&R Block will be prohibited from marketing RALs and related products in a deceptive or misleading manner and will be required to make clear and conspicuous disclosures to consumers prior to their purchase of these products. Terms of the settlement are limited to three years.
Brown has previously settled claims against Jackson Hewitt and recently concluded a trial against Liberty Tax Service. All three lawsuits involved refund anticipation loans and related products.