California Says H&R Block Disguises|Expensive Loans As Tax Refunds

SAN FRANCISCO (CN) - Attorney General Gerry Brown demands an injunction to stop H&R Block from telling customers - most of them poor people - that it can get them tax refunds within two days, without disclosing that these payments are actually expensive loans that "result in high interest rates and heavy fees."

Brown said it takes the IRS eight to 15 days to send tax refunds to people who file electronically, and 21 to 28 days by mail. Since 2001, Block has promised the money in two days, Brown said, but "these payments were actually loans offered by H&R Block that had annul percentage rates, including fees, of 80 percent or higher."

California law requires that "any tax preparer who advertises the availability of a refund anticipation loan shall not directly or indirectly represent the loan as a client's actual refund."

Brown demanded the injunction at a Superior Court hearing on Friday. The court indicated it will rule on April 3.

Brown said state investigators called H&R Block offices throughout California seeking information about how long it would take to get tax refunds. Two-thirds of the H&R Block offices said refunds could be sent to taxpayers within two days, without disclosing the fact that it was actually a loan, the attorney general said in a press release.

"Most of the people who get the loans receive the Earned Income Tax Credit. People who earn this credit typically make between $10,000 and $35,000 and have several dependents, making them especially vulnerable to high-interest loans," Brown said.

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