Tax-preparation firm to reimburse clients

Jackson Hewitt Tax Service Inc., the No. 2 U.S. tax preparer, will pay $5 million to resolve claims that it used deceptive marketing to push high-interest tax refund anticipation loans to low-income people in California.

Atty. Gen. Bill Lockyer said Wednesday that Jackson Hewitt would pay $4 million in restitution to customers who purchased same-day loans called “Money Now!” and other loan products. The company also will pay $500,000 in civil penalties and $500,000 to reimburse investigative costs to resolve a lawsuit filed in Alameda County Superior Court, Lockyer said.

Jackson Hewitt was accused of violating state and federal regulations against unfair debt collection and business practices, false advertising and unauthorized sharing of consumers’ tax information.

The company portrayed anticipation loans, some carrying annual interest rates of 200%, as refunds and falsely told consumers the loans were a quicker way to get money at tax time, Lockyer said.

Parsippany, N.J.-based Jackson Hewitt didn’t immediately comment.

Refund-anticipation loans are offered to taxpayers expecting a tax refund who don’t want to wait the two weeks to a month the Internal Revenue Service typically takes to send them out. The loans are heavily promoted during the tax-filing season.

More than a third of Jackson Hewitt’s clients took out the loans in 2005, according to the company’s annual report.

From 2001 to 2004, Californians bought more than 200,000 refund anticipation loans and other products from Jackson Hewitt, Lockyer said. Under the accord, customers will receive up to $30 per loan purchased and $15 for additional products they bought.