States say H&R Block to discuss refund loans
NEW YORK (Reuters) – H&R Block Inc., the largest U.S. tax
preparation company, will meet with pension officials from
three states to discuss their concerns about its controversial
tax refund loans, North Carolina Treasurer Richard Moore said
in a statement Tuesday.
Moore, New York State Comptroller Alan Hevesi and
Connecticut Treasurer Denise Nappier, who oversee funds holding
a combined 1.6 million H&R Block shares, in a letter Tuesday
raised concerns about refund anticipation loans. These are
high-rate, short-term loans sold by the company that let
customers who expect federal income tax refunds to receive cash
in one or two days.
Moore in the statement said the company agreed to meet
following a phone call Tuesday.
“When you treat your customers unfairly, it will eventually
damage your company and your bottom line,” Moore said in the
statement. “As shareholders, we are concerned that continuing
to market high-interest loans to the customers least able to
afford them is not only a dubious practice, but potentially
places our long-term investments at risk.”
H&R Block officials were not immediately available for
The state pension funds said these loans can charge an
annualized interest rate ranging from 40 percent to 700 percent
and are targeted toward poor consumers and recipients of the
earned income tax credit, citing the National Consumer Law
Center and the Consumer Federation of America.
The NCLC also estimates that 79 percent of taxpayers who
were sold refund loans in 2003 had incomes of $35,000 or less,
and over half were recipients of the Earned Income Tax Credit,
the states said.
Refund loans have already landed H&R Block in court on
several occasions and generated hefty legal costs.
In February California sued the company over excessive
interest rates and misleading advertisements, seeking hundreds
of millions in reimbursement and a civil fine of at least $20
Last December, H&R Block agreed to pay $62.5 million to
settle four class-action lawsuits over the loans. Last May, a
federal judge in Chicago rejected a $360 million nationwide
settlement raising similar issues, calling the sum inadequate.
Moore noted that earlier this year North Carolina submitted
a shareholder resolution calling for a vote on whether H&R
Block should change its business practices, develop tougher
standards for qualifying for these loans and charge lower
rates. The proposal was blocked from the annual meeting proxy,