New class action in Madison County marks 400th since 2000

Steve Gonzalez Sep. 20, 2006, 8:47pm

Cheryl Reynolds filed a class action suit against Kansas City-based H&R Block claiming the business defrauded consumers seeking instant income tax refunds.

The case filed Sept. 15 by Francine Schwartz of Arlington Heights is the 400th case seeking class action status in Madison County since January 2000.

Plaintiff also names Household Bank as a defendant.

According to the complaint, the defendants make refund anticipation loans (RALs) to taxpayers who file their tax return electronically.

"The RALs are made at a very high interest rate, often as much as 800%," the complaint alleges.

Reynolds claims the defendants misrepresent material terms of the RAL, including cost.

"Defendants unlawfully bait the consumer with low fees and then switch to higher fees in violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, and similar unfair and deceptive acts and practices statues of other states," the complaint states.

Reynolds claims the defendants misrepresent the cost of a RAL in the application by not disclosing the cost of the electronic filing.

She claims the total cost of the RAL is only disclosed once the consumer receives his refund check from the defendants which is usually three to five days after they apply.

"The electronic filing fee which ranged from $25 to $95 during the class period can double, if not triple, the cost of the RAL," the complaint states.

Reynolds contends that since the consumer is required to file electronically as a condition of obtaining an RAL, the electronic filing fee is a finance charge. She claims the defendants misrepresent the amount of the finance charge in the application.

"Defendants further fail to advise consumers that their tax returns could be filed electronically at a lower or no cost through the Post Office or Internal Revenue Service programs," the complaint states.

According to Reynolds, borrowers are often required to pay loan document preparation fees, administrative fees or surcharges to H&R Block for preparing the RAL documents.

She claims the defendants know the amount of the fees and other charges the consumer will be required to pay, however they do not disclose those fees on the application.

Reynolds also claims that Household pays H&R Block a kickback in order to encourage customers to apply for a RAL.

"The consumer does not know that he or she is paying an artificially inflated finance charge to accommodate hidden kickbacks from Household to Block," the complaint states.

According to the complaint, there is no federal jurisdiction over this case because Reynolds does not seek damages in excess of $75,000 and because no claims arise under the laws of the United States.

She claims Madison County is the proper venue because H&R Block is a non-resident of Illinois which allows commencement in any county and also because all of the defendants do business in Madison County.

Reynolds claims had she and the class known the true cost of the RAL, they would have sought a RAL lender whose fees were lower, chosen to file electronically file their returns elsewhere at a lower cost, or chosen to simply wait the two weeks for the IRS to mail the check.

According to the complaint, anyone in the country who obtained an RAL from the defendants from 1987 are eligible to join the class.

"The members of this class are so numerous, numbering in the millions, that joinder of individual actions is impracticable," the complaint states.

Reynolds claims she will fairly represent the interests of the class and states that she had once been certified as a class representative in a suit in federal court and further claims that she and her lawyer have the financial resources to adequately and vigorously prosecute this case.

"Plaintiff and class counsel are aware of their fiduciary duties to the class and are determined to diligently discharge those duties by vigorously seeking the maximum possible recovery fo (sic) the class," the complaint states.

"Defendants have committed unfair acts and practices by concealing that less expensive or even free electronic filing was available to the class members," the complaint also states.

Reynolds is seeking the court to enter judgment in her favor and in favor of the class for:

  • actual damages;
  • punitive damages;
  • statutory damages and penalties;
  • prejudgment interest;
  • an injunction halting the practices complained of;
  • attorneys' fees, litigation expenses and costs;
  • maintaining this case as a class action; and
  • for such further relief and other relief the court deems appropriate.

    The case is currently waiting to be assigned by Chief Judge Ann Callis.

  • More News