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H&R Block Launching Its Bank

Tax Preparer Settles IRA Class Action for $39 Million

September 7, 2006

H&R Block • Charges • Electronic Filing • Errors • "Free" Filing • Online • Refund Anticipation Loans • Option One Mortgage Corp. -- News • New York Stops H&R Block's Deceptive Sweepstakes Ads • California Sues H&R Block • H&R Block Sells Subprime Mortgage Unit • H&R Block Launching Its Bank • H&R Block Threatened Employees, Spitzer Charges • H&R Block Settles Tax Refund Loan Suit • H&R Block Readies New Bank as Business Soars • NY Accuses H&R Block of IRA Marketing Fraud • H&R Block Goofs on Its Own Taxes • Children's Defense Fund: Tax Refund Loans "Indefensible" • California Sues H&R Block Over Its "Instant Refund" Loans • H&R Block Doesn't Block Identity Theft • H&R Block Will Settle More Payday Loan Suits • Option One Agrees to Clean Up Its Lending Practices in PA • H&R Blocked: Consumer Groups Oppose Tax Giant's Proposed Bank • Tentative Settlement in Tax Loan Class Action • Class Action Challenges Electronic Filing Fee • Supreme Court Rejects Block Appeal in Class Action • Judge Upholds Racketeering Complaints Against H&R Block, Household • Court Clears Class-Action Suit • Tax Loans Victimize Consumers --- • All About HSBC

Having bulldozed the opposition, H&R Block is preparing to offer banking services to its clients, it will announce at its annual meeting today. The giant tax preparation firm has also settled a consumer class action suit over its refund anticipation loans.

The company said it will start offering bank accounts and hopes to accumulate at least one million deposits during next year's tax season.

H&R Block estimates that nearly three million of its customers do not have a bank account and are forced to pay high fees to cash their tax refund checks. Customers will be able to deposit their refund checks directly into their H&R Block account and will be able to access their funds through a prepaid bank card via ATMs.

H&R Block Bank was granted a charter by federal regulators in March, about the same time that New York Attorney General Eliot Spitzer filed a lawsuit charging that the company had defrauded hundreds of thousands of its customers by selling them IRAs that were "virtually guaranteed to lose money."

The Block Bank will also begin offering high-yield savings accounts and IRAs. Funds of up to $100,000 will be FDIC insured.

Class Action Settlement

Meanwhile, a federal judge has approved a $39-million settlement of a class-action lawsuit brought by customers over the company's refund anticipation loans.

It was the third effort to reach a agreement in the suit, which has dragged on since 1998. Block and co-defendant Beneficial National Bank -- now owned by London-based HSBC -- will split the payment.

The lawsuit is one of several alleging that Block failed to disclose high costs and other features of RALs made to more than 17 million clients over a 13-year period.

In December 2005, Block announced a combined $62.5 million settlement for four similar class-action suits involving 8 million clients. Another set of claims, alleging federal racketeering violations, is scheduled for a hearing next month.

Earlier this year, California Attorney General Bill Lockyer filed another lawsuit seeking damages for 1.5 million California residents with refund loans dating from 2001. Block has denied those allegations and is fighting that suit as well as the Spitzer action.

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