AG Brown files injunction against H&R Block over 'Rapid Refund'

Legal News Line Mar. 17, 2008, 8:51am


SACRAMENTO – With less than a month to go before the end of tax season, California's Attorney General, Jerry Brown, has requested an injunction against tax preparation giant, H&R Block. The injunction is part of a two-year-old lawsuit against Block, alleging the company engaged in false or deceptive advertising for its "Rapid Refund" program. This week Brown requested that the San Francisco Superior Court prevent H&R Block from telling its customers that tax refunds can be obtained within two days, without disclosing that such payments are actually loans. Jennifer Foster, a spokeswoman for H&R Block, told LNL that California courts have already ruled in the company's favor on two previous occasions. "Consistent with routine practice, the judge scheduled a hearing on the Attorney General's preliminary injunction in the future," she said. "H&R Block continues to be the industry leader in disclosures and training with respect to refund anticipation loans and remains committed to providing best-in-class service to its clients." The court has scheduled a hearing to decide the matter on April 3, 12 days before the tax filing deadline. This year's tax season will prove crucial to Block, which enjoyed a $300 million surge in revenues from its retail tax services last year. The company estimates 130 Americans will receive rebates this year ranging from $300 to $1,200. "Millions of Americans who aren't required to report an income have a reason to file," Block said in a press release last month. The company has more than 1,200 locations in California. According to the Attorney General's Office, Californians have bought more than 1.5 million refund anticipation loans from H&R Block since 2001. When the suit was originally filed in 2006, then-Attorney General Bill Lockyer alleged the Rapid Refund service unfairly targeted low-income families. Taxpayers filing for an Earned Income Tax Credit comprised 70 percent of the company's Rapid Refund customers. Nationwide, the Earned Income Tax Credit accounts is claimed on just 17 percent of all tax returns. People who earn this credit typically make between $10,000 and $35,000 and have several dependents. California's lawsuit further alleges that H&R Block violated IRS rules prohibiting the company from directly providing loans. According to Brown's complaint, the company provided customers with the loan applications, filled out the applications, and sent the applications to the banks. H&R Block also provided customer's loan money on an "Emerald" ATM card that Attorney General's office claims came with heavy fees and costs. California law and the Internal Revenue Service require that tax preparers distinguish between tax refunds and "refund anticipation loans" that are based upon the expected tax refund amount. "H&R Block incorrectly tells its customers that a tax refund can be obtained within two days--these payments are loans, not legitimate tax refunds," Brown said in a statement issued this week. "Consumers should know that such quick payments result in high interest rates and heavy fees."

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