Fri, Mar 02, 2001 EST
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Judge Hits H&R; Block With $500,000 Penalty
Over Deceptive Ads

By Kevin Hall   Associated Press
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RICHMOND, Va. — A federal judge barred H&R; Block, the nation's largest income tax preparer, from using misleading phrases to advertise its "Rapid Refund" loan program and ordered to pay more than $500,000 to an upstart rival.

Block has been sued before over its advertising for "Rapid Refund," in which tax filers receive bank loans for the amount of their anticipated refund. But the financial institutions can charge fees or interest.

U.S. District Judge Raymond Jackson in Norfolk accused H&R; Block of deliberately and maliciously using deceptive advertising to draw customers in the Hampton Roads area just as a competing tax preparation service, was launching its business there.

"We feel that this is a victory not only for Liberty Tax Service, but also for taxpayers who didn't fully understand the terms of this loan product because they weren't properly disclosed," said Lenny Holt, Liberty's chief operating officer.

The ruling ordered H&R; Block to pay Liberty Tax Service $507,477, representing a portion of Block's profits in Hampton Roads in 2000. The advertising also appeared last year in California, Iowa, New York and Ohio.

In 1993 in Connecticut, H&R; Block agreed to change its advertising for refund anticipation loans after the state consumer protection agency complained.

The company's "past advertising conduct and prior notice regarding the use of the term 'refund"' along with an internal company report on the program indicate the company acted in "bad faith in repeating such advertising during the 2000 tax season," Jackson wrote in his ruling released Monday.

H&R; Block "strongly disagrees with the judge's finding of maliciousness" and will appeal, Linda McDougall, a spokeswoman for the Kansas City, Mo.-based company, told The New York Times.

The company filed a motion Monday asking that it continue to be allowed to use the term "rapid refund," a request Jackson denied, the Times reported. It said Jackson gave the company until March 9 to remove a list of what he called offending terms from its advertising.

Liberty Tax Service operates 500 offices in the United States and Canada. H&R; Block operates 10,000 offices in the United States, Canada, Australia and the United Kingdom.

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