H&R Block Penalized by FTC for Deceptive Practices, Faces $7 Million Fine

January 8, 2025 TruthUSA

The FTC has fined H&R Block and ordered it to undergo a series of reforms for deceptive advertising and obstacles in downgrading tax filing products.

The Federal Trade Commission (FTC) imposed a $7 million fine on tax-preparation giant H&R Block for what it describes as “unlawful practices,” including misleading claims about “free” tax-filing services and failures in customer support systems.

The FTC announced on Jan. 8 that it had finalized a settlement with H&R Block, which denies wrongdoing but has agreed to pay the fine and implement significant reforms. These include improving transparency in advertising, upgrading customer-service processes, and providing clearer pricing and product disclosures to ensure compliance with federal consumer protection laws.

The settlement stems from a lawsuit filed by the FTC in February 2024, in which the federal agency accused H&R Block of deceptive practices in advertising and customer service for its do-it-yourself online tax-filing products. The FTC alleged that H&R Block’s online tax products steer consumers into higher-cost options unnecessarily due to unclear explanations about which products cover specific tax forms or situations.

According to the FTC, many users begin their tax returns with more expensive products they don’t need, and when they attempt to downgrade, they face significant obstacles, including needing to contact customer support via chat or phone and losing all previously entered tax data, requiring them to start over. This discourages downgrading, while upgrades are seamless and immediate.

“H&R Block designed its online products to present an obstacle course of tedious challenges to consumers, pressuring them into overpaying for its products,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection, said in a statement at the time the lawsuit was filed.

In addition, the FTC accused H&R Block of deceptive advertising by promoting its services as “free” despite many consumers being ineligible for the free products. These alleged practices, the FTC claims, are both unfair and misleading to consumers.

The FTC’s lawsuit led to a proposed settlement outlined in November 2024, with the terms finalized on Jan. 7 in a court order under which H&R Block agreed to implement key reforms to address the agency’s concerns.

Specifically, H&R Block is prohibited from advertising its tax-filing services as “free” unless they are genuinely free for all users, with clear disclosures about eligibility. In addition, the company must simplify the downgrade process by allowing users to switch to less-expensive products without losing previously entered tax data, eliminating the need to contact customer support.

The company is also required to improve transparency in advertising, ensuring clear explanations of what each product covers to prevent consumers from unnecessarily selecting higher-cost options. An automated downgrade option must be available by January 2026, and H&R Block will undergo independent audits to ensure compliance.

H&R Block did not respond to a request for comment on the settlement.

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