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H&R Block Offers $39 Million to End Refund-Loan Suit

April 21, 2006|From the Associated Press

H&R Block Inc. has agreed to settle a long-standing class-action lawsuit over its refund anticipation loans for $39 million.

The Kansas City, Mo.-based tax preparer said Thursday that the settlement, subject to court approval, would cover 1.7 million class members who bought 2 million loans from April 8, 1994, to Dec. 31, 1996.

Beneficial National Bank, which provided the loans through H&R Block, would pay half the settlement, H&R Block said. It said that roughly $30 million of the settlement would go to the class members.

With refund anticipation loans, customers due a tax refund can receive most of the money in two or three business days by paying a fee to file the return electronically and a loan processing fee. Critics say the loans take advantage of financially unsophisticated taxpayers who aren't adequately told about the high interest rates.

Plaintiffs sued H&R Block in federal court in Chicago in 1998, claiming that its marketing of the loans was illegal. They sought to include 17 million customers who had received loans over a 13-year period.

Court rulings since then have whittled down the number of class members, and many of the claims have been thrown out. The tax preparer was to go to trial next month over the remaining allegations of federal racketeering.

U.S. District Judge Elaine Bucklo in Chicago must approve the settlement. She has rejected two previous offers, including a $360-million proposal covering 28 million customers last year.

H&R Block agreed in December to settle more than two dozen class-action lawsuits over the refund loans for $62.5 million. That settlement covered 8 million customers.

The company still faces a suit filed this year by California Atty. Gen. Bill Lockyer on behalf of 1.5 million state residents who have taken out loans since 2001.

H&R Block shares rose 9 cents to close at $22.34.

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