H&R Block Inc. (HRB) has settled a lawsuit that alleged the company of fraudulently marketing its Express Individual Retirement Account (Express IRA) product that had hidden fees and low interest rates.
New York Attorney General Andrew Cuomo said that over 600,000 Express IRA accounts were opened since 2000. Cuomo alleged that around 85% of the customers ended up with losing money as the fees charged by the company was more compared to the interest paid by it. Customers who closed those accounts incurred additional undisclosed fees.
Cuomo also claimed that senior managers at H&R Block were aware of the fact that many of its Express IRA customers were losing money on the IRAs, though no actions were being taken on the company’s behalf.
H&R Block has agreed to refund between $11.4 million and $19.4 million in fees to customers who purchased the Express IRA accounts. The eligible customers will be contacted by a court-appointed administrator.
Additionally, H&R Block will pay $750,000 in fines, fees and costs to the New York State and convert the Express IRA's into retirement accounts that do not charge fees.
Typically, an IRA is a retirement plan account that provides some tax advantages for retirement savings.
In addition to this settlement, H&R Block has settled several other private class action lawsuits, which were based on same allegations.
As a result of unemployment and other factors associated with the stressed economy, the balance sheet of tax preparers such as H&R Block and its competitor Jackson Hewitt Tax Service Inc. (JTX) has been severely impacted. We believe that the earnings of these companies will remain restricted in the short term as the economy will require more time to revive. Additionally, this negative news for H&R Block may result in its share price fluctuation in the near term.
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