The California Attorney General has filed a lawsuit against
H
&
amp;R Block and five of its subsidiaries, alleging the violation
of 15 state and federal laws regulating debt collection practices
and contracts.
H
&
amp;R Block, the complaint contends, is guilty of deceptive
advertising, unfair business practices and unauthorized sharing of
customer information in the provision of their refund-anticipation
loans (RALs).
The California Attorney General has filed a lawsuit against H&R Block and five of its subsidiaries, alleging the violation of 15 state and federal laws regulating debt collection practices and contracts.
H&R Block, the complaint contends, is guilty of deceptive advertising, unfair business practices and unauthorized sharing of customer information in the provision of their refund-anticipation loans (RALs).
H&R Block, a tax preparation corporation with offices nationwide, including Morgan Hill, Gilroy and Hollister, has purportedly led consumers to believe that these RALs are “instant money” or even “cash,” when in fact RALs are simply loan checks for the amount of a projected tax refund. That is, after loan fees, tax preparation fees and other charges, each take a bite of the customer’s refund. H&R Block is also accused of directing customers to “companies that charge fees to cash RAL checks, with H&R Block getting a kickback on a portion of those fees.”
Californians have bought more than 1.5 million RALs from H&R Block since 2001, according to the complaint, and “Block has received a substantial portion of the loan fees.” Additionally, the complaint alleges that the RAL program targets low-income workers, noting that 70 percent of the company’s customers for RALs were recipients of the federal Earned Income Tax Credit (EITC), and the EITC was established by the government specifically to benefit low-income families.
The RAL system has, according to the compliant, been engineered to yield the most profits possible to H&R Block, even to the point that “tax professionals” working for H&R Block will neglect to inform customers how to better adjust their withholdings during the course of the year so that they will instead wait for a refund come tax time.
And although H&R Block has frequently billed itself as a tax adviser to be trusted, the suit also accuses the corporation of collaborating with banks in a “deceptive debt collection scheme” to achieve these profits. Internal Revenue Service rules prohibit H&R Block from directly providing RAL loans; however, H&R Block provides clients with the loan applications and the loan checks and takes out contracts with banks for the loans themselves. In addition, H&R Block fails to inform customers of fee liabilities and alleged debts from previous RAL purchases. The complaint alleges, “Block clients who are claimed to owe debt from a prior year are led to expect a loan, but instead find themselves in a collection proceeding.”
H&R Block is further accused of violating state and federal laws regarding the use and sharing of customer information. The company has purportedly used tax return data to market their various financial products, including RALs, without written consent from the consumer.
The complaint asks for at least $20 million in civil penalties plus restitution to all harmed consumers, which could ultimately cost H&R Block hundreds of millions of dollars. It was filed alongside a request that the San Francisco Superior Court issue a temporary restraining order to prohibit H&R Block from “engaging in deceptive debt collection practices related to RALs.”
