Tax preparation giant H&R Block Inc. will pay $62.5 million to settle class-action lawsuits over its use of refund anticipation loans.
Block said the settlement would cover more than 8 million customers who received the loans between 1989 and 2005. The company has already set aside money for the potential settlement and announced it plans to take a third-quarter charge of $31 million, to cover the remainder of the settlement.
Under the refund anticipation loans, customers entitled to a tax refund could receive most of the money in two or three business days by paying a fee to file the return electronically, plus a loan-processing fee. The lawsuits said such arrangements took advantage of financially unsophisticated taxpayers who were not adequately informed about high interest rates.
Besides the cash settlement, Block agreed it would better advise customers in the future about other options in filing taxes and gaining refunds quickly, as well as any interest charges or other fees they would have to pay.A federal judge in West Virginia is scheduled to review the settlement Friday. If approved, the deal will resolve four class-action suits filed in West Virginia, Ohio, Alabama and Maryland, along with claims pending in 22 other states and Washington, D.C. Block still faces two other lawsuits tied to the loans. A federal case accusing the company of racketeering is scheduled to go to trial in March and a 1992 case is pending in Pennsylvania.
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