Jerry Brown (D)

SACRAMENTO, Calif. (Legal Newsline)-California Attorney General Jerry Brown has announced a settlement with tax giant H&R Block that prohibits the company from marketing loans against potential tax returns as early tax refunds.

The terms of the settlement, in which the company denies any wrongdoing, include up to $2.45 million in restitution payments for customers who bought a Refund Anticipation Loan or a Refund Anticipation Check from 2001 through 2008.

Block will also pay California $2.4 million in fees, penalties and costs.

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

Brown's lawsuit, filed in 2006, alleged the company marketed and sold income tax refund anticipation loans and a similar product called Refund Anticipation Checks. The company, according to a press release issued by the attorney general's office, agreed to work with the attorney general during the course of the investigation to reach an agreement and settlement.

A Refund Anticipation Loan is a short-term, high-interest loan secured by the taxpayer's anticipated income tax refund. Brown's lawsuit claimed the company deceived customers with its advertising the product as an early return, obscuring that it was indeed a loan with exorbitant interest.

The attorney general's lawsuit also alleged that H&R Block used unfair debt collection practices that included garnishing refund proceeds for debts.

According to the terms of the settlement, H&R Block is prohibited from marketing these loans and related products in a "deceptive or misleading manner." The company will now be required to provide disclosure statements prior to consumers purchasing the loans.

The settlement also empowers and administrator to begin contacting eligible customers directly about their potential reimbursement payments. Those who believe they may be eligible can contact the attorney general's office for more information.

The agreement with H&R Block completes a trifecta of lawsuits against the country's three largest tax preparation companies. Brown had settled claims against Jackson Hewitt for similar practices and concluded a court case against Liberty Tax Service recently.

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