NY City Sues H&R Block Over Ads
Suit: Refund campaign preys on poor
Published by Newsday, Inc.
By Henry Gilgoff STAFF WRITER
March 28, 2002
In H&R Block's marketing for its new refund-anticipation loan, advertising for Instant Money towers on billboards, rushes by on city buses, reaches out to TV couch potatoes, and fills many store signs.
In State Supreme Court, the promotion is included in a suit the city Department of Consumer Affairs has filed against the giant tax preparation operation alleging deceptive advertising and other violations of city law.
Gretchen Dykstra, city consumer affairs commissioner, voiced concern yesterday that many consumers signing up for the tax-preparer arranged loans, based on their anticipated refund, are low-income, qualify for an Earned Income Tax Credit and can ill afford to sacrifice any money for bank fees.
"I think it's unconscionable that you would take from poor people a big bite of the little they have," Dykstra said. The finance charge for Instant Money was $39.95 for a $500 loan, with an estimated 224 percent annual percentage rate, according to a recent bank application, and $99.95 or an estimated 56 percent on a $5,000 loan. The fees are in addition to those paid for tax preparation and electronic filing.
The Kansas City, Mo.-based H&R Block responded in a statement yesterday that it believes the city agency's suit stems more from its "dislike of Refund Anticipation Loans in general than with operational issues relating to H&R Block specifically."
The company said that the Instant Money offer is new this year. But the legal battles between the city and H&R Block over refund-anticipation loan marketing has been ongoing for years. The city suit charges that the company has violated a 1997 settlement and four prior agreements. It was part of a rash of litigation, including a class-action suit that is pending.
In the 1997 settlement, the company paid a $200,000 fine and $50,000 for city costs, and said that the agreement should not be construed as conceding any "intentional violation" of city laws. This month's suit seeks a permanent injunction against alleged violations and unspecified fines.
The Instant Money offer was described yesterday on the company Web site: "With Instant Money from H&R Block, you can get a loan for the amount of your federal income tax refund, up to $5,000, within minutes of applying."
Susan Kassapian, special counsel for the city agency, said the smaller print used in advertising to disclose that the "Instant Money" is a loan violates a city mandate for conspicuous disclosures.
The suit also alleges that the advertising fails to conspicuously disclose that "only a small percentage of consumers qualify" for Instant Money. According to the company, nearly 30 percent of applicants have qualified. Consumers rejected are offered other options, including less expensive loans, the company said.
In random calls made to H&R Block offices in the city, including Queens, the suit charges, employees "continue to steer" customers to the bank-related products, as they allegedly did last year. The city last year issued more than 2,000 violations and began negotiations that failed to reach a resolution, with each side blaming the other yesterday.
Copyright © 2002, Newsday, Inc.