The lawyer normal for Washington, D.C., has filed a shopper safety lawsuit towards Liberty Tax accusing the tax prep chain of deceiving shoppers with deceptive advertisements and promotions and predatory pricing.
D.C. Legal professional Normal Karl Racine’s workplace filed the go well with Wednesday towards Liberty, which is the third largest tax prep chain within the nation. The lawsuit alleged that Liberty aggressively marketed its providers to low-income residents in D.C. by providing them $50 in money “only for submitting,” however then really elevated the tax prep payment for shoppers who accepted the money funds. He accused the tax prep chain of violating D.C.’s shopper safety legal guidelines and is asking for a courtroom order requiring Liberty to supply correct and truthful data, and pay financial aid to 1000’s of shoppers, together with civil penalties.
“We filed this lawsuit to cease Liberty Tax from illegally preying on D.C.’s most susceptible low-income residents,” Racine mentioned in a press release. “Now’s the time for Liberty Tax to be held accountable for persistently and fraudulently tricking D.C. residents into overpaying for tax preparation. Deceptive shoppers is against the law, and we cannot enable companies to revenue by dishonest District residents.” (Full disclosure: Racine was a university classmate of this author.)
A Liberty Tax location in Louisville, Kentucky
Luke Sharrett/Bloomberg
Liberty has had a checkered historical past lately. Its founder, John Hewitt, who had previously co-founded the Jackson Hewitt tax prep chain after working as an govt at H&R Block, was ousted from the corporate in 2019 after a intercourse scandal involving staff on the firm, which needed to settle a sexual harassment lawsuit (see story). The corporate’s mum or dad firm on the time, Franchise Group Inc., additionally settled a lawsuit with the IRS and the Justice Division alleging that Liberty failed to take care of sufficient controls over returns ready by franchisees and failed to forestall the submitting of doubtless false or fraudulent returns by franchisees (see story). Final 12 months, Liberty Tax was acquired by NextPoint, a particular objective acquisition firm, for $182 million in money and $67 million in shares (see story). A NextPoint Monetary spokesperson didn’t instantly reply to a request for touch upon the D.C. lawyer normal’s lawsuit.
To lure shoppers, in keeping with the lawsuit, Liberty Tax aggressively promoted speedy handouts of $50 “only for submitting with Liberty Tax” early in tax season earlier than the top of February. Liberty Tax referred to it as “money in a flash” and depicted it as a “perk” with no draw back. The corporate closely featured “money in a flash” by itself web site, in on-line movies, and by stationing sign-wavers with indicators corresponding to “GET $50 NOW” exterior of its shops — that are primarily positioned in lower-income neighborhoods. Nevertheless, the corporate didn’t disclose that customers who accepted the money can be charged greater than those that didn’t. On common (relying on which varieties they filed), shoppers who accepted the $50 supplied by Liberty have been then charged wherever from $67 to $200 extra for tax prep providers than shoppers who did not take part within the promotion.
Liberty operates 4 places in D.C. the place it supplied over 12,000 money funds to shoppers as a part of its “money in a flash” promotion from 2015 to 2021, in keeping with the AG’s workplace, rising the costs that 1000’s of D.C. shoppers paid for tax prep with out their information, particularly low-income taxpayers. On common, in keeping with the AG’s workplace, Liberty charged people who file easy returns with solely a 1040 and a W-2 a median of $75 extra in the event that they accepted the upfront $50 in money. Nevertheless, it charged people who acquired the Earned Revenue Tax Credit score a median of $93 to over $200 greater than EITC recipients who did not settle for the $50 money promotion.