As millions of Americans are beginning to file their taxes in the midst of tax season, the Federal Trade Commission is cracking down on one of the most popular tax preparation services in the nation.
The commission has filed a complaint against tax preparation company H&R Block for its alleged “deceptive marketing” and for creating an “obstacle course” for customers who choose to downgrade and use its more affordable products, according to a statement.
Related: FTC calls TurboTax 'deceptive' and bans a key part of its advertising
The complaint from the FTC alleges that H&R Block has “cost consumers time and money” as its online tax filing service misleads them into using more expensive products they didn’t need, claiming that the company “fails to clearly explain which of its products cover what forms, schedules, or tax situations.”
Also, when customers chose to not use those higher-cost products, the FTC alleges that the company presents them with “a series of time-consuming challenges” to pressure them into spending more money.
For example, if customers chose to downgrade, H&R Block requires them to speak to a customer service representative to do so. Also, all of the tax data that customers have entered into the company’s online filing system is then deleted, and they are forced to redo the tax return process all over again.
“H&R Block designed its online products to present an obstacle course of tedious challenges to consumers, pressuring them into overpaying for its products,” said Samuel Levine, director of the FTC Bureau of Consumer Protection, in the press release. “Today’s action demonstrates that companies using coercive techniques that harm consumers can expect to hear from the FTC.”
The FTC also accuses H&R Block of false advertising as it highlights in the complaint that the company “deceptively” markets its products as “free” in its TV and online advertisements despite many customers not being qualified to use them.
“The ads contain language saying — sometimes only in fine print — the “free” offer applies only to ‘simple returns,’” reads the press release. “The ads, however, do not explain what a ‘simple return’ is, and the complaint notes that H&R Block has changed its definition of a ‘simple return’ multiple times in recent years.”
In an emailed statement to TheStreet, H&R Block Chief Legal Officer Dara Redler claims that the company offers consumers "fair and transparent pricing" and that it "allows consumers to downgrade to a less-expensive DIY Product via multiple mechanisms while ensuring the preparation of accurate tax returns.”
Just last month, H&R Block released a commercial titled “It’s better with Block: Breakroom” where it claims that filing simple tax returns are “free” and that it is a superior option to TurboTax, its main competitor who offers similar tax filing services.
Ironically, the new complaint from the FTC comes after the commission had filed an opinion against Intuit’s TurboTax last month where it also accused the company of “deceptive advertising.” The FTC claimed that most customers do not qualify for TurboTax’s “free edition,” which is heavily advertised as “free” for customers with simple tax returns.
“Intuit restricts eligibility for the free version of TurboTax to taxpayers who have ‘simple tax returns,’ as defined by Intuit,” said the FTC in its opinion. “Intuit’s definition of ‘simple tax returns’ has varied during the relevant time period.”
Related: Veteran fund manager picks favorite stocks for 2024
