H&R Block Settles Refund Loan Dispute With New York

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H&R Block has announced an agreement with the Department of Consumer Affairs (DCA) of the City of New York to settle refund anticipation loan disputes, launch new taxpayer educational programs, and establish a cooperative working relationship with the DCA.

Under the terms of the agreement:

  • H&R Block will develop a $400,000 educational campaign to educate New York City taxpayers about the Earned Income Credit (EIC), a federal income tax credit for low-income working families often missed by eligible taxpayers.
  • H&R Block will contribute $345,000 to help fund the DCA's own citywide EIC educational campaign.
  • A newly designated independent monitor will help H&R Block and the DCA identify and resolve any future issues promptly. H&R Block first proposed a monitor in 2000.
  • H&R Block will offer $35 rebate coupons to approximately 62,000 clients who qualified for the EIC and obtained refund anticipation loans in 2001 and 2002. The rebate coupons can be used to help pay for tax preparation services in 2003 and 2004.

All pending DCA actions against the company related to refund anticipation loans are resolved by the agreement, which contains no admissions of liability or any intentional violation of the city's laws. H&R Block will pay the DCA $625,000 and also cover its investigative costs, in addition to broadening its tax education efforts and providing rebates.

"We're pleased to have reached a resolution that will help us work cooperatively with the DCA to deliver more services to New Yorkers," said Jeff Yabuki, H&R Block chief operating officer and head of U.S. Tax operations. "The educational campaign and rebate coupons will raise awareness of the earned income credit and enable more New Yorkers to seek the assistance of a professional tax preparer. The independent monitor will review Block's advertising and business efforts, quickly calling to our attention any areas of concern and thereby avoiding lengthy legal disputes."

The agreement resolves a complaint by the DCA that certain H&R Block ads and some of its office receptionists in New York did not adequately differentiate between refund anticipation loans and Rapid Refund, H&R Block's trademark for electronic filing products. H&R Block maintains that its advertising was sufficiently clear. The company has expanded its training programs to better prepare receptionists to respond to clients' questions about its products and services.

Comprehensive Educational Campaign

The company will provide $745,000 in funding for comprehensive educational campaigns in New York City designed to raise awareness and understanding of the complex EIC. The company will spend $400,000 developing its own educational program that will help more taxpayers understand whether they qualify for the credit. The company will also contribute $345,000 to help fund the DCA's citywide educational program, "It's Your Money, Come And Get It."

An estimated 30 percent – approximately 230,000 — eligible New Yorkers fail to claim earned income credits, leaving nearly $500 million in unclaimed benefits. Together, the H&R Block and DCA educational programs are intended to increase the number of EIC filers in New York City by 15 percent over the next two years. New York taxpayers eligible for the federal earned income credit may also receive an additional 25 percent matching state tax credit.

Rebate Coupon Program

H&R Block will offer $35 rebate coupons and information about the EIC to EIC-eligible clients who obtained refund anticipation loans in 2001 and 2002. The rebate coupons can be redeemed to help pay for H&R Block's tax preparation services in 2003 and 2004, when the redemption forms are mailed by April 15 in those years. Or the taxpayer can simply receive cash for the rebate coupon when it is mailed between April 16 and June 15 in those years.

Financial Summary

The cost of this agreement was previously recorded as a $3.25 million reserve for expected costs. This charge will have no affect on future financial results.

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