CONSUMERS UNION URGES H&R BLOCK TO REFORM TAX LOAN PRACTICES

Company's Refund Anticipation Loan Practices Are a Bad Deal
for Consumers, Especially Low-Income Tax Filers

AUSTIN, TX -- Tax filers tempted by H&R Block's refund anticipation loans (RALs) -- short-term, high cost loans for the anticipated amount of their tax return -- should instead file electronically, wait a few extra days, and have their refunds deposited directly into their bank account, Consumers Union said today.

The group sent a letter to H&R Block Tax Services President Thomas Zimmerman on Wednesday urging the company to reform its refund anticipation loan practices. RALs are short-term cash advances that provide cash against a customer's anticipated income tax refund. The fees typically run from $29.95 to $89.95, translating into interest rates of 67% to 773%.

Rob Schneider, a senior staff attorney with Consumers Union's Southwest Regional Office, said the high fees especially hurt those taxpayers who can afford them the least. Approximately 40 percent of consumers who get refund anticipation loans receive the Earned Income Tax Credit, the largest federal antipoverty program.

"The rates for these loans are way too high, and the company is already collecting a fee for tax preparation," Schneider said.

Consumers Union also urged H&R Block to eliminate the fee to cash the RAL check. The company has established a partnership with national check casher ACE Cash Express. ACE has placed check-cashing machines in some H&R Block offices and will charge a fee to cash refund anticipation loan checks. As part of the arrangement, ACE gives its customers a $10 discount on tax preparation at H&R Block.

"By the time a consumer has paid for an RAL and a check cashing fee, it amounts to a hefty bite out of a tax refund, particularly for many low-income tax filers who are left with a fraction of their refund," Schneider said. H&R Block's web site notes that RALs allow tax filers to get their refund checks in two days. But, by filing taxes electronically, consumers can avoid extensive processing fees and receive tax refunds in as few as 10 days.

In 2001, H&R Block processed 4.5 million refund anticipation loans, netting $68 million in profits -- nearly 8 percent of the company's revenues from its U.S. tax preparation services.

# # #

Consumers Union, publisher of Consumer Reports, is an independent, nonprofit testing and information organization serving only the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health nutrition, and other consumer concerns. Since 1936, our mission has been to test products, inform the public, and protect consumers.