Kansas City, Mo. – Tax preparer H&R Block Inc. on Wednesday agreed to pay $62.5 million to settle a number of class-action lawsuits dealing with its use of refund anticipation loans.
A circuit court judge in West Virginia is scheduled to consider the settlement on Friday. If approved, it would resolve four class-action suits filed in West Virginia, Ohio, Alabama and Maryland, as well as resolve claims pending in 22 other states and the District of Columbia.
H&R Block said the settlement would cover more than 8 million customers who got the loans between 1989 and 2005.
The company already set aside money for a potential settlement, but said it expects to take a third-quarter, after-tax charge of $31 million, or 9 cents per share, to cover the rest.
Under the refund anticipation loans, customers due a tax refund could receive most of the money in two or three business days by paying a fee to file the return electronically, plus a loan-processing fee. Critics claim such loans prey upon low-income households, immigrants and financially unsophisticated taxpayers not adequately informed about the high interest rates.
H&R Block agreed to advise customers in the future about other options in filing taxes and gaining their refunds quickly, as well as any interest charges or other fees.
