H&R Block's marketing efforts are again stirring controversy as several consumer groups alert the Treasury Department this week of alleged privacy violations by H&R Block of data collected from taxpayers using the IRS' Free File program.

The group claims that H&R Block is improperly marketing its mortgage services to consumers who enter mortgage interest information in the Block Web site which they have entered through the IRS Free File program. Free File is an alliance of tax preparation services working with the IRS to offer free tax return filing options to potentially over 60% of taxpayers.

A letter was sent to the U.S. Treasury Department on behalf of The Consumer Federation of America, National Consumer Law Center, Consumers Union, U. S. Public Interest Research Group and the Electronic Privacy Information Center complaining about H&R Block pitching mortgages to select consumers based on their tax return information.

The letter sites one such solicitation that pops up on a consumer's computer screen: "We noticed that you entered an itemized deduction for home mortgage interest. By refinancing your mortgage, you may be able to lower your monthly payments or pay off other debts. Now is a great time to take advantage of historically low interest rates. It’s easy! Do you want to learn how refinancing your mortgage can help you?"

The taxpayer must click on "Yes," "No," or "Contact me later" to return to tax preparation.

The letter from the consumer groups urged Treasury to prohibit commercial tax preparers from using the Free File program to market financial products and services to taxpayers, including mortgages and high cost refund anticipation loans. The letter also urged Treasury to close a loophole in its regulations that permits tax preparers to use confidential tax information for cross-marketing.

"This new level of marketing, based on the information a taxpayer enters into his tax return using Free File, is extremely troubling and requires enforcement action by Treasury and the Internal Revenue Service," the groups said.

Block Stands By Its Practices

"The consumer groups' claims are inaccurate," H&R Block said in a written statement. "In fact, H&R Block secures its clients consent twice." H&R Block also said no qualified user is blocked from using the free tax preparation service based on their refusal to receive marketing messages.