LIBERTY TAX AND LOANS is an American tax preparation company that provides online and in-person filing services. The company has more than 3,000 locations where customers can visit to have their taxes filed by an expert. The company also offers what it calls an “Easy Advance” loan, which is a short-term unsecured loan based on a customer’s expected federal refund amount and is paid back through the taxpayer’s tax return. The loans are offered in amounts up to $6,250, and are subject to approval.
The lawsuits filed against Liberty allege that the company violated state consumer-protection laws by failing to disclose information about the fees associated with its refund anticipation loans, violating state usury laws by charging excessive interest rates, and deceiving consumers about the nature of the loans. In addition, the plaintiffs have asserted that Liberty disproportionately targeted minorities and military families in New York, and discriminated against them by charging higher interest rates than non-minority and non-military families.
In its complaint, the Government alleges that Liberty directly controls its company-owned stores and that it maintains a substantial degree of control over its franchisees. The Government alleges that returns prepared by franchisees flow through Liberty before they are filed with the IRS and that Liberty failed to conduct adequate oversight of the quality of the returns it received from its franchisees and did not take action after learning of EITC fraud at some of its locations.
In a separate case brought by the Federal Trade Commission (FTC), the agency alleged that Liberty exploited low-income consumers by advertising immediate cash payments of up to $50 for completing their LIBERTY TAX AND LOANS and by increasing the charges for those who accepted the instant-cash payment. The FTC charged that Liberty’s advertising in poor communities was a “deceptive and unfair practice” under the Consumer Financial Protection Act of 2010 and the Fair Credit Reporting Act, 15 U.S.C. 1601-1667f.
In a settlement with the Justice Department, Liberty agreed to stop using instant-cash promotions, change its billing practices for refund anticipation loans to be transparent about the terms of the loan, and engage an independent third party approved by the United States to monitor the company’s compliance with this agreement and assess its fraud prevention measures. The agreement also requires Liberty to report any violations to a Federal Trade Commission official and, upon request by the United States, to appear before a United States district court to explain its compliance with this order. The agreement also prohibits Liberty from charging its customers for audit aid and does not affect the rights of taxpayers to file amendments for free, as most other tax-filing companies do. The agreement is subject to final approval by the court. The agreement also includes a restraining order barring the company from attempting to collect on behalf of itself or others money supposedly owed by its consumers for past years’ refund anticipation loans. Two violations of this restraining order by Liberty will result in a $15,000 fine.
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