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.
