State Leaders Oppose H&R Block's Refund Anticipation Loans
Posted August 16, 2006 5:42 a.m. EDT
RALEIGH, N.C. — Managers of three state pension funds with holdings in H&R Block Inc. urged the financial company Tuesday to reform its practice of giving high-interest loans in anticipation of federal tax refunds.
North Carolina treasurer Richard Moore, New York comptroller Alan Hevesi and Connecticut treasurer Denise Nappier, also requested an immediate meeting with H&R Block's board of directors.
"We are concerned that continuing to sell high-interest loans ... to the customers least able to afford them is not only a dubious practice, but potentially places our long-term investments at risk," the group wrote.
The states hold 1.6 million shares of H&R Block stock, about 0.5 percent of the company's 322 million outstanding shares. North Carolina's retirement system holds more than $7 million worth of H&R Block stock, according to the treasurer's office.
The company awards so-called refund-anticipation loans to customers set to receive a federal tax refund. The loans generally last about 10 days before the refund arrives and can carry annualized interest rates as high as 700 percent, Moore said.
About 79 percent of all people who use the loans are low-income, Moore added.
"If you continue to abuse your customers, the customers will no longer stay with you," he said. "We want to ensure that in this tax season, North Carolinians get treatment that's fair, responsible and legal."
H&R Block, based in Kansas City, Mo., released a statement on Tuesday afternoon, in part, saying:
"Its interesting that Mr. Moore, only now, is indicating his concern. For 16 years, the North Carolina Banking Commission has approved fees associated with our refund loan product. For the past six years, he has been that commissions chairman. And each year, the commission has approved the fee without objection."
The statement went on to say that the company is "unaware of a single client who has issued a complaint to the banking commission concerning the product in 16 years" and that "of more than 800 refund loan facilitators in North Carolina, H&R Block offers one of the most competitively priced products in the state. Why is Block being singled out?"
The Community Reinvestment Association of North Carolina had sought a shareholder vote on whether H&R Block should eliminate or change its refund-anticipation loan program. But the company successfully fought off that attempt earlier this month.
"It's time for shareholders to have an honest dialogue with the leadership of H&R Block and ask for some answers to their policies," said Peter Skillern, director of the CRA-NC, a consumer protection group.
The nation's largest tax preparer has spent tens of millions of dollars settling lawsuits against its refund-anticipation loans, and among other lingering legal troubles, the company still faces a lawsuit filed in February by California Attorney General Bill Lockyer on behalf of 1.5 million state residents who have taken out refund loans since 2001.
Moore said he has asked the state commissioner of banks to investigate H&R Block's practices.
James Andrews, state president of the AFL-CIO, representing about 10,000 workers in North Carolina, said the loans "rob working families at a time when working families are struggling to put food on the table and gas in the car."
North Carolina has been a leading advocate in eliminating high-interest loans, namely in the payday lending industry, and Moore has been a strong advocate among companies in which the state holds shares.
Last year, he opposed a Wells Fargo policy that gave financial support to payday lending institutions. Moore, along with North Carolina and California reinvestment groups, managed to get a vote from shareholders on the issue _ but Wells Fargo & Co shareholders overwhelmingly rejected a proposal to cut ties with the industry.
H&R Block shares, which have traded in a 52-week range of $19.80 to $28.38, were up 32 cents to $22.49 in afternoon trading Tuesday.