H&R Block Inc will pay as much as $20.2 million to settle a New York lawsuit accusing it of fraudulently marketing individual retirement accounts (IRAs) that charged hidden fees.
Reuters reports that New York Attorney General Andrew Cuomo said the accord calls for the tax preparer to refund $11.4 million to $19.4 million of fees to customers nationwide who opened one of its Express IRAs. H&R Block will also pay $750,000 in fines and other costs to the state, and convert Express IRAs into new retirement accounts that do not charge fees.
Cuomo said the size of the refund depends on the number of claims made, according to Reuters.
In addition, H&R Block settled private class-action lawsuits based on the same allegations which were pending in the federal court in Kansas City, Missouri, where the company is based.
New York had accused H&R Block of steering more than 600,000 customers to Express IRAs, without disclosing hidden fees that wiped out the interest that 85% of them could earn. Eliot Spitzer, Cuomo's predecessor, filed the lawsuit in March 2006.
Spitzer originally sought $250 million of civil penalties and other remedies. His lawsuit had said the median Express IRA account had a $323 balance, too low for investors to offset such charges as $10 annual maintenance fees, $15 set-up fees, $15 "re-contribution" fees, and $25 termination fees.
Gene King, an H&R Block spokesman, called the New York settlement "satisfactory for all parties," according to Reuters. He had no immediate comment on the class-action settlement.
Among the defendants in the New York case was H&R Block Financial Advisors Inc, which the company sold in 2008 to Ameriprise Financial Inc. Ameriprise did not return Reuters' call seeking comment.
The case is New York v. H&R Block Inc, New York State Supreme Court, No. 401110/2006.