Consumer Group Targets H&R Block Over Refund Loans

Reuters ^ | Tue January 13, 2004 03:54 PM ET | Richard Leong

[Kerberos]

NEW YORK (Reuters) - A U.S. consumer group said on Tuesday it has launched a series of protests against H&R Block Inc., the nation's largest tax preparer, saying its tax refund loans are too expensive and hurt low-income families.

The Association of Community Organizations for Reform Now (ACORN) said interest rates and fees on refund anticipation loans are too high, typically costing $150 or more to provide money only marginally faster.

Low-income families, often cash-strapped, end up using a hefty part of their refunds from earned income tax credits, in some cases as much as half, to cover the cost of the loans, according to ACORN.

Borrowers in many cases get their refund money only about a week sooner than if they waited to get it from the government.

Families eligible for earned income tax credits in 2001 received refunds averaging $1,600, according to a 2002 study by the Consumer Federation of America and the National Consumer Law Center.

A 2002 study by the Brookings Institute found that 39 percent of families who qualified for earned income tax credits in 1999 took out tax refund loans.

ACORN members plan demonstrations at H&R Block offices in more than 30 cities around the country, including New York City, Washington, D.C., and Los Angeles, the group said.

H&R Block could not immediately be reached for comment.

Tax refund lending is a lucrative and fast-growing area for commercial tax preparers. The country's biggest preparers earned $357 million in 2001 on refund loans and "fast cash" products, more than double the $138 million earned in 1998, according to a 2002 Brookings Institute study.

A year ago, H&R Block severed its direct involvement with refund loans. Household Tax Masters, a unit of Household International Inc., makes and services the loans through H&R Block's offices. Household International was acquired last year by British-based bank HSBC Holdings Plc . At the time it was the No. 2 U.S. consumer finance company.

While H&R does not make these loans, ACORN spokeswoman Allison Conyers told Reuters said, "Essentially they are the people responsible. They are selling the loans and signing them up."

According to ACORN, 43 percent of the electronically prepared tax returns by H&R Block were packaged with a refund loan, or a special short-term account and included the extra charge that this entails. Household told Reuters that, contrary to what ACORN charges, it ensures that customers are aware of their options in getting their tax refunds.

"We have a very stringent compliance program. We make sure customers know what they are purchasing. They know there are several options to get their refunds," Household spokesman Mark Friedlander said.

In November, ACORN and Household reached a settlement on the company's mortgage lending practices.

"This is a separate issue," ACORN's Conyers said of the group's action on refund loans.

[Kerberos]

Another concerned group that believes people should not be responsible for their own decisions.

[KarlInOhio]

Tax refunds are the IRS's way of saying "Thanks for loaning us the money interest free for a year, chump."

[Veggie Todd]

Doesn't this story come out every year at tax time? If it's such a bad deal (and it is) why do people keep signing up for it? A fool and his money....

[ozaukeemom]

We just got the chart showing the dates a refund should hit if direct deposited. Amazing! Less than 2 weeks from filing. If people have to have it faster, then I guess H&R is providing a service. We do not offer the instant refund here and no one seems to mind too much. Of course, I work with real accounting types and we charge less! lol Don't get me wrong I took the course, but I would never have my taxes done there.JMHO

[Isolationist]

Here's a simple solution to the high costs of loan – DON'T get the loan. Wait for the check in the mail. This is not a matter of HR overcharging – it's a matter of people being greedy and wanting their money sooner rather than later.

[hsmomx3]

Heck, they should just buy Tax Cut and do their own taxes. Even a first grader could do them. A very simple and inexpensive program.

[doodad]

The Association of Community Organizations for Reform Now (ACORN) said interest rates and fees on refund anticipation loans are too high, typically costing $150 or more to provide money only marginally faster.

Then don't take that option, duh. If you're getting EIC you shouldn't need any help to fill out an EZ return anyway. This is just a stupid fee.

[from occupied ga]

Low-income families, often cash-strapped, end up using a hefty part of their refunds from earned income tax credits

EIT Credits are not refunds on taxes paid. This is just another form of welfare. I get sick of the government pandering to "low income families" with my money. If they want more money let them work harder. There was a study put out last year that showed that family income correlated directly to family hours worked (well duh). They want more money let them work more than 20 hours a week.

The study showed the highest income families worked an average of 80 hours a week or more. The lowest averaged 20 hours a week or less.

[Kerberos]

"Tax refunds are the IRS's way of saying "Thanks for loaning us the money interest free for a year, chump."

No kidding, I have never understood why people get all excited about getting money back from the government. They question I always ask is "why did you give them too much in the first place?" It is real interesting to hear the responses I get back, talk about rationalizing.

But the bottom line is, no matter how they phrase it, is that they can't, on their own accord, save money. The same is true for home ownership, if you try to look at owning a home from an investment perspective it is a disaster. But for many people it is the only saving they have.

[Kerberos]

"Here's a simple solution to the high costs of loan – DON'T get the loan. Wait for the check in the mail."

But, but, they might have to wait a week longer and they need that big screen TV now. Have you no compassion?

[Kerberos]

"Doesn't this story come out every year at tax time? If it's such a bad deal (and it is) why do people keep signing up for it? A fool and his money"

Instant gratification, we don't teach people to plan and save anymore.

[Eric in the Ozarks]

H & R isn't the only tax preparer doing this.

[Kerberos]

"H & R isn't the only tax preparer doing this"

No, they just get targeted because they are the biggest.

[Kerberos]

"EIT Credits are not refunds on taxes paid. This is just another form of welfare"

Exactly, have a kid and the government will pay you a few grand for it.

[IYAS9YAS]

No kidding, I have never understood why people get all excited about getting money back from the government.

I owe the State of Idaho exactly $3.00 after all is said and done this year. In the past, they had a $2.00 credit for electronic filing...I wish they still had it. I'm gonna pay with 300 loose pennies. I see some who just can't wait for their refunds...I tell them the government let me get mine early, every two weeks.

[Kerberos]

"I tell them the government let me get mine early, every two weeks."

LOL

That's how I play it. I have to ask myself, "would the government give me an interest free loan for a year?" I don't think so.

[17th Miss Regt]

I wonder if Jackson Hewitt is also being targetted by this bunch of leftist shills (ACORN).

[hunter112]

I have a check for one dollar that the IRS sent me a few years ago! Then, a year later, they sent me a replacement check for the dollar, so I got to have my money back, and the souvenir check as well! This last year, it was a three dollar check I got back.

H&R Block and all of the other fast-food style drive-thru quickie tax preparers feed off of people who are too stupid to either fill out a short form, or find a copy of TurboTax, or even use a freebie version of TaxAct. They love to be the bringer of good news, they never tell anyone to lessen their withholding, it makes their outrageous fees easier to swallow. Anybody stupid enough to fall for their trickery is stupid enough to get a high cost refund loan!

This liberal do-gooder group would do better to spend its time and money educating people to look out for themselves.