Texas Judge Approves Settlement in H&R Block Refund Suit

A Texas judge approved a settlement Tuesday that could cost H&R Block Inc. as much as $262 million, ending one of several class action lawsuits filed against the tax-preparation firm over its "refund anticipation" loans. The suit charged that Kansas City, Mo.-based Block misled its clients when it did not disclose the true costs of the short-term loans, offered to customers awaiting income tax refunds.

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A Texas judge approved a settlement Tuesday that could cost H&R Block Inc. as much as $262 million, ending one of several class action lawsuits filed against the tax-preparation firm over its popular “refund anticipation” loans. Under terms of the settlement, Block will give $26 million in cash to 700,000 Texas customers, along with coupons redeemable over five years for Block services and products. Block also agreed to pay $49 million in legal fees, although $26 million of that total is expected to be refunded to clients. Block would pay the full settlement amount only if all the clients used all the coupons and discounts. But company spokeswoman Linda McDougall said it’s not likely that would happen. Judge Manuel Banales in Kleberg County, Texas, called the settlement “fair and reasonable.” Banales rejected arguments that attorneys involved in the suit would receive too much money. The suit charged Kansas City, Mo.-based Block misled its clients when it did not disclose the true costs of the short-term “refund anticipation” loans, offered to customers awaiting income tax refunds. Critics assert the loans victimize low-income households, immigrants and financially unsophisticated taxpayers who aren’t adequately informed about the high interest rates. Block has denied such allegations, and is contesting 12 class action lawsuits, McDougall said. The company has offered to settle four of those suits, she said. In April, a federal judge in Chicago rejected a $25 million settlement that would have covered 17 million customers who borrowed against their tax refunds between Jan. 1, 1987, and Oct. 26, 1999. Block shares closed at $42.69 Tuesday, up $1.29, on the New York Stock Exchange. Copyright 2003 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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