H&R Block Inc. said that it will provide better and more transparent notification to customers detailing all the costs tied to its refund anticipation loans.

Block made the announcement in tandem with HSBC North America, and said that the changes will be put in place for the coming tax filing season.

Changes to the process include a new "debt-alert" service, that requires Block representatives to alert customers about possible outstanding tax-related debt -- from a prior tax refund loan or tax preparation fees -- that could affect the loan decision. The customer will be given access to a phone allowing them to call HSBC for information on any debt owed.

Also, Block said that as part of an improved disclosure process, customers will receive a side-by-side comparison chart outlining all filing options, fees, and the time it takes to receive the client's refund. A customized report, containing financial planning information, as well as a Block employee, will also be charged with reminding clients who choose RALs that they can keep more of their refund by selecting a non-loan product.

The loan disclosure documents that will now be provided to Block customers also explain in plain language that refund anticipation loans are, in fact, loans. In a February lawsuit, California's Attorney General alleged that the company misleads its customers about the true costs of the short-term loans, and can impose fees that translate into interest rates of more than 500 percent.

Block announced in September that it would reduce the cost of refund lending for many taxpayers. This week, the company offered up a $2,800 classic refund anticipation loan, as an example, saying that amount is the average loan size for Block. The tax prep giants said that the cost will be reduced by more than 40 percent compared to last year, and when taken as an 11-day loan, the finance charge translates to a 36 percent APR.

That scenario applies to loans taken with a new H&R Block Emerald Prepaid MasterCard, which is, of course, provided by the newly-created H&R Block Bank.

Tax refund loans account for about 4 percent of Block's annual revenues. According to the company's annual report, in the 2004-05 fiscal year, Block recognized a pretax profit of $101.3 million on revenues of $182.8 million generated from the loans across the country.


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