Liberty Tax Service, the third largest tax preparer in the U.S., has lost a lawsuit over deceptive ads that California Attorney General Jerry Brown claimed blurred the line between free tax refunds and expensive refund anticipation loans.
â€œLiberty Tax Service lured cash-strapped Californians into paying for high-cost loans, when they could obtain tax refunds free from the IRS just weeks later,â€ said Brown in a statement. â€œThis ruling bars Liberty from deceptive advertising that blurs the line between IRS tax refunds and pricey loans.â€
Liberty Tax Service’s print and television ads misled customers by promising â€œMost Refunds in 24 Hours,â€ according to Brown.
In reality, Liberty was selling refund anticipation loans, not a tax refund. Customers had to pay an upfront fee of about $30 plus interest, at a rate that could be as high as 395 percent annually. According to the IRS, refund anticipation loans target low-income taxpayers, especially those who receive the Earned Income Tax Credit. Approximately 70 percent of Libertyâ€™s refund anticipation loan customers in 2006 and 2007 received this credit. A spokesperson for Liberty did not immediately respond to a request for comment. More.