FTC Secures $7M Settlement with H&R Block Over Deceptive Ads

H&R Block has agreed to pay $7 million and make significant changes to its online tax filing products after a Federal Trade Commission (FTC) lawsuit alleged deceptive practices. The proposed settlement, announced on Nov. 12, aims to eliminate hurdles for consumers who seek to downgrade to less expensive tax filing products and improve transparency in advertising.

The settlement follows an administrative lawsuit filed by the FTC in February 2024. The agency accused H&R Block of falsely advertising its online products as “free” when many users could not actually file for free. It also alleged that consumers were often funneled into more expensive options due to unclear disclosures about which tax forms and situations were supported by each product.

Consumer Redress and Reform

The settlement, which still requires final approval, includes $7 million in consumer redress. It also requires H&R Block to implement reforms for the 2025 and 2026 tax filing seasons. By February 2025, the company must allow consumers to downgrade products without needing to contact customer service. Additionally, by 2026, it must eliminate the practice of deleting users’ previously entered tax data when they switch to a lower-tier product.

FTC Bureau of Consumer Protection Director Samuel Levine emphasized the significance of the agreement, stating, “American taxpayers who seek tax-filing help should be able to choose the services they need—and know the truth about how much they’ll pay. The FTC’s action today will help lower the stress and expense of tax season for millions of taxpayers.”

Reforms to Address Complaints

According to the FTC, H&R Block created unnecessary barriers for users attempting to downgrade. Consumers were required to contact customer service by phone or chat, a process that was time-consuming and inconvenient. When downgrading, users lost any data they had already entered, forcing them to re-enter information from scratch.

The proposed settlement mandates that H&R Block:

• Allow downgrades without requiring customer service contact by February 15, 2025.
• Retain previously entered tax data for users switching to lower-tier products by the 2026 tax season.
• Provide clear, easily accessible options for downgrading within the online platform.
• Disclose in its “free” advertising either the percentage of eligible taxpayers or that the majority of taxpayers are not eligible for free filing.

Legal and Financial Implications

The FTC’s action underscores its commitment to holding companies accountable for deceptive practices. A unanimous 5-0 vote by the Commission approved the proposed settlement for public comment. Commissioner Melissa Holyoak, while concurring with the agreement’s release, noted that her acceptance does not constitute final approval.

Public comments on the settlement will be accepted for 30 days after the proposal is published in the Federal Register. After the comment period, the FTC will determine whether to finalize the consent order. Violations of the finalized order could result in civil penalties of up to $51,744 per infraction.

Ongoing Oversight

The FTC staff attorneys involved in the case include Claire Wack, Simon Barth, Christopher E. Brown, and Josh Doan. The Commission’s action aims to provide relief for taxpayers and set a precedent for accountability in the tax preparation industry.

For more information on the settlement and instructions for submitting public comments, visit Regulations.gov.