H&R Block to refund fees paid by all customers nationwide who purchased “Express IRAs”

Agreement requires H&R Block to convert all existing “Express IRA” accounts to new program that does not charge onerous fees

NEW YORK, N.Y. (January 4, 2010) - Attorney General Andrew M. Cuomo today announced a multi-million dollar settlement with H&R Block requiring the company to refund fees it charged to low- and middle-income customers nationwide who were enticed into purchasing its fee-laden and fraudulently marketed Express IRA product.

The agreement settles a lawsuit filed by the Attorney General’s Office that alleged that H&R Block (NYSE: HRB), the nation’s largest provider of tax preparation services, steered hundreds of thousands of its customers, including more than 30,000 New Yorkers, into individual retirement accounts that were virtually guaranteed to lose money due to a combination of hidden fees and low interest rates.

Depending on the number of claims made under the settlement, H&R Block will refund between $11.4 million and $19.4 million in fees to customers nationwide. Eligible consumers will be contacted in writing by a court appointed administrator.

“H&R Block’s aggressive peddling of fee-laden retirement accounts that were virtually guaranteed to lose money needlessly cost families across the country millions of their hard-earned dollars,” said Attorney General Cuomo. “This settlement will provide a measure of relief in these difficult times.”

Since 2000, H&R Block opened more than 600,000 Express IRA accounts for its tax preparation clients. Customers were told that the IRA paid “great rates” and was “a better way to save.” However, 85 percent of the customers who opened the accounts paid more in fees than they earned in interest. Hundreds of thousands of H&R Block customers closed their accounts and incurred additional undisclosed fees.

The Attorney General’s lawsuit alleged that the company pushed the Express IRA in an effort to encourage repeat customers for its tax preparation services and to maximize its fee revenue. It also cited internal documents showing that H&R Block’s senior management at the time knew that many of its customers were losing money on their Express IRAs, yet took no action to address these concerns. Instead, H&R Block continued to tout the Express IRA as a good way for lower- and moderate-income families to save money

The Attorney General’s Office determined that H&R Block’s failure to adequately disclose its fees, its failure to warn that the interest paid would not cover the fees in certain instances, and its misleading description of the interest rates as “great” when they were at times less than one percent annually violated New York’s consumer fraud law, and were a breach by the company of the fiduciary duties it owed to its clients.

In addition to providing full refunds of fees it charged to all customers who purchased an Express IRA since 2000, H&R Block will pay $750,000 in fines, fees and costs to the state. H&R Block will also convert all existing Express IRA accounts into a successor IRA program that does not charge fees. Finally, the company will enhance its disclosures of fees and terms and implement other business reforms.

The Attorney General’s settlement coincides with an independent settlement of various consolidated federal private-plaintiff class actions, based upon the same allegations, pending before the U.S. District Court for the Western District of Missouri, sitting in Kansas City.

Senior Trial Counsel David N. Ellenhorn and Assistant Attorney General Armen Morian litigated the case against H&R Block, under the supervision of David A. Markowitz, Chief of the Investor Protection Bureau. They were assisted by Assistant Solicitors General Cecilia C. Chang and Richard O. Jackson.

Comments

  1. Ah, great! This cleared up some contradictions I've heard.

    ReplyDelete

Post a Comment

Popular posts from this blog

DISTRICT ATTORNEY VANCE ANNOUNCES INDICTMENT OF SIX SUBCONTRACTING COMPANIES AND THEIR OWNERS IN MULTIMILLION-DOLLAR FRAUD

Seth M. Harris Has Been Charged in $3.7 Million Bank Fraud Scheme