H&R Block settles state suit over tax refund loans

California’s attorney general has settled a lawsuit against H&R; Block Inc. over a widely used loan program that gives the nation’s largest tax preparer a chunk of customers’ tax refunds.

Atty. Gen. Jerry Brown said Friday that the $4.85-million settlement would stop H&R; Block from offering high-cost loans it had marketed as early tax refunds.

Former Atty. Gen. Bill Lockyer sued H&R; Block in 2006, adding California to a long list of others that sued over its “refund anticipation loans.” The Kansas City, Mo.-based company arranges the cash advances for customers so they won’t have to wait an extra one to four weeks for a check from the federal government.

In return, customers give a percentage of their tax refunds to H&R; Block and its banking partner.

H&R; Block did not acknowledge any wrongdoing.

The company agreed to pay as much as $2.45 million in restitution for consumers who purchased a “Refund Anticipation Loan” or a “Refund Anticipation Check” through H&R; Block between Jan. 1, 2001, and Dec. 31, 2008. The company also will pay $500,000 in penalties and $1.9 million in fees and costs.

The settlement also bars H&R; Block from marketing the loans and other products in a deceptive manner.