H&R Block Inc. and HSBC Taxpayer Financial Services have agreed to pay $360 million to settle a lawsuit over loans secured by anticipated tax refunds.
They are to pay $110 million in cash and distribute $250 million in coupons to 28 million consumers, the borrowers' lawyers said Monday. H&R Block, the world's largest tax preparer, said it would record an after-tax expense of $38 million, or 23 cents a share, in the fourth quarter.
The lawsuit, filed by consumers in 1998 in federal court in Chicago, claimed that officials at H&R Block and Household Bank FSB misled low-income customers about interest rates and charged exorbitant rates until their tax refunds arrived. H&R Block has been sued in at least six states and in federal court over the practice.
HSBC Holdings PLC bought Household International in 2003.
The amount of cash and number of coupons will be distributed according to the number of refund anticipation loans each customer received, the plaintiffs' lawyers said. HSBC spokesman James Pieper said he did not know how much of the total settlement each company would pay.
