Texas judge approves H&R Block settlement

Kansas City Business Journal

A Texas judge on Tuesday approved the settlement of a class action lawsuit regarding H&R Block Inc.'s refund anticipation loans.

The settlement, approved by Judge J. Manuel Banales in Kleberg County, Texas, District Court, calls for Block (NYSE: HRB) to distribute $26 million in cash, as well as tax preparation and software coupons, to 700,000 tax service customers in Texas. The settlement could cost Block about $262 million if all of those customers take advantage of the coupon and discount offers, though that is considered unlikely.

Block currently faces 10 class-action lawsuits in states including Illinois and Maryland related to the company's refund anticipation loans. The lawsuits focus on Block's practice of facilitating high-interest loans for customers who expect tax refunds from the government. Consumer advocates have argued that the loans exploit lower- and middle-class taxpayers by charging them a fee for money they otherwise would receive in days.

The 6-year-old Texas case involves plaintiffs' claims that Block breached its fiduciary duty to customers by failing to disclose a license fee the lending bank paid Block for patent and trademark rights, marketing and technology costs, and administrative expenses concerning the loans from 1992 to 1996.

Block spokesman Bob Schneider said the Texas settlement does not indicate how the company will contest the other class actions. The Kansas City company has denied liability in all of the cases.