Chicago A federal judge has rejected a proposed $25 million settlement in a class-action lawsuit that accuses H&R Block and a lender of being unfair to customers who got tax refund anticipation loans.
U.S. District Judge James Zagel said in his 25-page opinion, however, that he would reconsider if the settlement were redrawn to make sure that eligible loan customers got all of the $25 million.
Under the rejected proposal, any portion of the $25 million left over after all claims were in would have reverted to the Kansas City, Mo.-based Block and its co-defendant, Beneficial National Bank.
Zagel's opinion was issued Friday, a week after hearings in which a group of attorneys with lawsuits pending against Block and Beneficial in various states claimed $25 million was not enough.
The amount "is a fair, adequate and reasonable one -- with one important caveat," Zagel said. "The total $25 million recovery is adequate as long as that is the true recovery.
"I decline to approve the settlement in its current form. If the parties can agree on a settlement that distributes the entire $25 million to claimants, I will reconsider."
Besides paying each eligible customer $15, the proposed settlement reserved $4.25 million for attorneys fees.
H&R Block has several offices in Lawrence.
Electronic filing procedures currently can get tax-preparation customers their refunds in as little as two weeks. Refund anticipation loans provide customers with their money in a few days for a fee.
The settlement would end a legal marathon for Block and Beneficial, which have been fighting such suits for a decade. Block has been sued no fewer than 22 times; Beneficial also has been a defendant because it provided many of the loans.
As refined over the years, the main charges are that lenders were mistreated when they were not told that Block has a 49.999 percent interest in the loans and receives a fee for each loan Beneficial makes. Critics say that on an annualized basis, such flat fees have topped 250 percent in some cases.