LAS CRUCES, N.M. (CN) - The Navajo Nation claims a string of H&R Block franchises targeted poor families in a scheme that charged more than 300% interest on short-term tax refund anticipation loans.
The Navajo Nation and the Consumer Financial Protection Bureau sued Jeffrey Scott Thomas on Tuesday in Federal Court. They also sued his businesses, S/W Tax Loans fka Fast Refund Loans, J Thomas Development of NM fdba H&R Block, and Thomas's employee, Dennis R. Gonzales.
The Navajo claim that Thomas created S/W Tax Loans specifically to offer Refund Anticipation Loans, or RALs, and trained his tax preparers to persuade customers to take out RALs and to conceal the interest rates.
Thomas "operated several H&R Block franchises in New Mexico and the territory of the Navajo Nation," according to the complaint.
Refund Anticipation Loans through the corporate H&R Block line of credit have a maximum annual percentage rate of 36 percent.
But the Navajo claim that Thomas's wholly owned company charged APRs ranging from 240 percent to 310 percent for RALs, sometimes without disclosing the rates to the customers.
The companies also calculated interest based on a 45-day loan term despite an expected turnaround on an IRS tax return of about 12 days, and in some cases concealed that customers' returns already had been received - so they could persuade the customer to take out a second loan, according to the complaint.
The Navajo seek restitution, costs, damages and punitive damages for violations of the Truth in Lending Act, the Consumer Financial Protection Act and deceptive trade.
They are represented by Harrison Tsosie and Paul Spruhan with the Navajo Nation Department of Justice.
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