FTC warns prep companies about misusing customer data

The Federal Trade Commission says five large tax preparation companies could face civil penalties if they use or disclose data collected for tax prep for such unrelated purposes as advertising without getting the consumers' consent first.

The five firms are H&R Block, Intuit, TaxAct, TaxSlayer and The Lampo Group LLC, d.b.a. Ramsey Solutions.

The move comes amid broader concerns about the activities of some of the larger tax prep companies and large technology companies regarding consumer and client data. In August, class-action lawsuits were launched against Google and Meta over data gathered by "tracking pixels" placed on tax-filing sites, and in September, a judge ruled that Intuit cannot market its Free File services as free, following a lawsuit brought by the FTC.

The agency warned the companies that they could face penalties of up to $50,120 per violation if they misuse personal data in ways that run counter to the original purpose for which this information was collected. 

Without consumer approval, the FTC warned, the tax prep companies cannot:

• Use information collected in a context where an individual reasonably expects that such information will remain confidential for purposes not explicitly requested by the individual;
• Use such information to obtain a financial benefit that is separate from the benefit generated from providing the product or service requested by the individual; and,
• Use such information to advertise, sell or promote products or services.

Scott Eells/Bloomberg

The agency also warned it is unlawful to make false, misleading or deceptive representations concerning the use or confidentiality of such information. The FTC specifically warned that it considers it unfair or deceptive to use tracking technologies such as pixels, cookies, application programming interfaces or software development kits to amass, analyze, infer or transfer personal information in the ways above without consumers' consent.

The notices sent to the preparation companies detail the acts and practices that were found to be a violation of the FTC Act in a case against Beneficial Corp. some 50 years ago. In that case, the commission found that the company used unfair and deceptive practices by using information collected for prep services for unrelated loan solicitation.