Caveat: H&R Block Will Empty Your Tax Refund

H&R Block just settled a lawsuit for acting as a loan shark to people desperate to get their IRS tax refunds. No word yet on whether they will attempt to parlay these type of services into accepting betting on NFL games. When the commonly used Latin phrase for buyer beware, caveat emptor [caveat represents the beware part], is a part of your informational literature as a result of a court order, that’s always a tough nut to crack for financial advisors. The WSJ article explains:

In the complaint, filed in early 2006, Attorney General Edmund G. Brown Jr. alleged H&R Block disguised refund anticipation loans, which carry fees and other costs, as tax refunds, and used unfair debt collection practices where customers’ refund proceeds were used to pay off debts they supposedly owed.

“This settlement prevents H&R Block from marketing high-cost loans as early tax refunds,” Mr. Brown said. “This is especially important because often these loans go to those who can least afford them.”

Article referenced is copied in full at end of post.

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H&R Block Reaches Settlement in Ad Suit

JANUARY 2, 2009, 5:57 P.M. ET

By JOHN KELL

The California Attorney General’s office reached a $4.85 million settlement with H&R Block Inc. in a lawsuit that alleged the tax preparer used deceptive advertising of tax refund loans.

In the complaint, filed in early 2006, Attorney General Edmund G. Brown Jr. alleged H&R Block disguised refund anticipation loans, which carry fees and other costs, as tax refunds, and used unfair debt collection practices where customers’ refund proceeds were used to pay off debts they supposedly owed.

In the settlement, H&R Block agreed to pay $2.45 million in restitution for consumers who purchased a refund anticipation loan — a short-term loan secured by a taxpayer’s anticipated income tax refund — between January 2001 and December 2008. H&R Block will pay $500,000 in penalties and $1.9 million in fees and costs.

“This settlement prevents H&R Block from marketing high-cost loans as early tax refunds,” Mr. Brown said. “This is especially important because often these loans go to those who can least afford them.”

H&R Block denied any wrongdoing but said it has worked with Mr. Brown to improve its practices.

Additionally, H&R Block is required to offer disclosures to consumers prior to their purchases of the products.

Shares of H&R Block were even in after-hours trading after closing down 0.9% to $22.51 in the regular session.

Write to John Kell at john.kell@dowjones.com
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About Jorge Costales

- Cuban Exile [veni] - Raised in Miami [vidi] - American Citizen [vici]
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