1.      Block must cease arranging, marketing, and investing in Refund Anticipation Loans. These predatory products carry equivalent Annual Percentage Rates of up to 700% and strip wealth from consumers, especially those with the lowest incomes who qualify for the federal Earned Income Tax Credit.  To add insult to injury, Block not only collects fees for arranging these predatory loans for its clients, but also profits by buying up to a 49% stake in the loans.

A good place to start would be for the company to commit to specific and substantial targets to provide its “unbanked” customers with low-cost savings accounts.  This would allow low-income families to join the financial mainstream, start to build assets, and get their tax refunds quickly and safely.

Additionally, H&R Block must commit to support federal legislation that would resolve the problem of RALs by prohibiting all tax preparation companies and other financial services firms from offering them..   

2.      H&R Block’s Bank must not circumvent the Community Reinvestment Act.  If Block wants to open a bank, it needs to assume the same responsibilities banks are required to meet.  Block Bank proposes to take deposits and offer bank products nationally through its tax preparation offices.  Yet H&R Block lacks a firm plan, goals, or a description of how it will serve low income community members.  H&R Block must work with community groups to provide transparency, ensure low income customers are being treated fairly, and determine how the company will fulfill its CRA obligations.

3.      Block must engage in responsible lending practices. We believe H&R Block initially sought a thrift charter to secure OTS preemption protection from state and local anti-predatory lending laws for subprime subsidiary Option One. Block should not be allowed to evade state and local laws, especially given its disparate lending. More than half of H&R Block's mortgage loans to African Americans in 2004 were over the federally defined subprime rate spread. H&R Block also remains one of the only financial services companies that does not guarantee a prime product to prime customers.  H&R Block must commit to changing this policy. 

      In order to meet this commitment, Block will invariably have to take concrete steps, which may include:  setting performance goals, creating financial incentives for relevant staff to ensure customers receive the right product, conducting greater outreach and education of brokers, monitoring and penalizing brokers that send prime borrowers to the subprime channel, working with community based organizations to outreach and educate affected consumers, ensuring that any communication and disclosure to the customer shows the long term benefits and the ease and quickness of obtaining the lower cost product, etc.  Block’s written commitment to date does not evidence the appropriate level of thoughtfulness to ensure the commitment is real.

4.   The Board of Directors must hold management accountable for its actions.  The primary basis of both the recent California and New York Attorney Generals’ lawsuits against the company are that the marketing of Block’s products did not live up to the reality.  A word game was played with consumers.  As an example, H&R Block advertised that tax filers can get their refund today, when it is actually a loan that the consumer is getting today at a high cost.  As another example, H&R Block advertised Express IRAs as a great deal, when 85% of all investors lost money.

      There is a corporate culture where language is used to provide cover for actions.  There continues to be a mismatch between the defenses that H&R Block offers and its actions.  Management needs to make substantive moves towards reform.  The Board of Directors must demonstrate greater involvement and leadership.  The position of Mark Ernst as Chairman, CEO and President is indicative of management having too much influence on the Block Board. The Board must hold management to a greater accountability for its performance.