H&R Block has agreed to settle a massive class action suit in Texas. Approximately 700,000 taxpayers will share in the proceeds.
Texas State District Judge Manuel Banales accepted Block's offer of a settlement of $26 million, significantly lower than the $75 million the judge attempted to extract earlier this year, but still a hefty sum.
The class action lawsuit alleged that Block engaged in a "clear and serious violation of duty" by not informing the firm's clients of kickback fees it received from its lender, Household Finance, with regard to refund anticipation loans sold by Block.
Refund anticipation loans are short-term loans given to taxpayers that will be repaid with the refunds from tax returns prepared by Block. Block receives a fee from Household Finance for each loan sold.
Members of the class action will share the proceeds of the settlement and will also receive coupons good for tax services provided by Block. The coupons are worth as much as $500 in services. The judge called the settlement "fair and reasonable."
Block no longer receives the fees from Household Finance in exchange for providing the high-interest refund anticipation loans. Block has been sued in six states and also in federal court over the same issue. Throughout, Block has insisted it has no duty to its customers to reveal the fee arrangement between Block and Household.
Officials at H&R Block had no comment about the Texas settlement.