(CN) – H&R Block has agreed to refund up to $19.4 million in fees paid by customers who bought Express IRAs in a settlement with New York Attorney General Andrew Cuomo, who said the company had been charging “onerous fees” to low- and middle-income families.
The largest U.S. tax preparation service allegedly pressured hundreds of thousands of customers to set up individual retirement accounts that were “virtually guaranteed to lose money,” the attorney general’s office said. H&R Block opened more than 600,000 Express IRA accounts since 2000.
About 85 percent of account holders were paying more in fees than they earned in interest, Cuomo said, which prompted many of them to close their accounts, only to discover additional hidden fees.
In his lawsuit, Cuomo cited evidence that upper management at the company knew many customers were losing money on the accounts, but continued to market them as “a better way to save.”
H&R Block allegedly the Express IRAs in an effort to get repeat customers for its tax preparation services.
More than 30,000 New Yorkers opened accounts, Cuomo said.
The company will refund from $11.4 million to $19.4 million in fees, depending on the number of claims, and will pay $750,000 in fines to New York.
H&R Block will also convert all existing Express IRAs to a new program that does not charge fees.
“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,” Cuomo said.
His office claimed that H&R Block’s marketing and inadequate disclosures violated New York consumer fraud law.