The largest tax preparation firm in the US, H&R Block, is expecting to have to contest lawsuits in six separate states after a national settlement was rejected by a federal judge.
The recent spate of law suits against the firm and its banking partner Household International Inc have arisen from complaints that extortionate rates of interest were charged on loans offered to customers awaiting tax refund payments. Some claim these interest rates often exceeded 100 per cent.
After an Illinois District Judge rejected a $25 million settlement last month, fearing the plaintiffs were not adequately represented by their lawyers, H&R Block's chief executive Mark Ernst is now resigned to facing actions on a state by state basis. These include New York, Maryland, Pennsylvania and Texas.
Meanwhile a previous settlement in Texas dating back to November last year is awaiting a judge's consent. In this case, the tax preparer agreed to pay the plaintiff's lawyers $49 million in cash. Some 700,000 of the firm's clients will also be entitled to $262 million worth of coupons for tax services.
Compounding these unfavourable legal rulings, the company recently announced a 3.4 per cent drop in clients in the year up to the April 15 tax filing deadline.
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