H&R Block wiped out the tax data of consumers trying to choose a more affordable option, FTC alleges

Federal Trade Commission

Ever spend hours (and hours) inputting complicated financial information online only have it deleted? It’s frustrating enough when it’s due to a technical glitch, but according to an FTC complaint against tax preparer H&R Block, wiping out consumers’ already keyed-in tax data was an intentional sales tactic the company used to pressure people to pay for pricier products. Read on to learn more about H&R Block’s conduct that the FTC alleges is, well, taxing – and deceptive and unfair – to consumers.

According to an administrative complaint that will be available soon on the FTC website, H&R Block has used an extensive TV and online campaign to deceptively market its services as “free” – as in “nada. . . zip. . . zilch” – when the services weren’t free for most filers. While ads said the “free” offer applied to “simple returns,” the FTC alleges H&R Block made it difficult for consumers to figure out whether their returns qualified as “simple.” What’s more, the FTC says the company frequently changed its own definition of “simple.” The complaint cites examples of the confusion and frustration caused by the company’s allegedly deceptive claims.

But it’s how H&R Block allegedly coerced people to pay for services they didn’t need that merits particular attention. According to the complaint, throughout the online filing process, the company upsold pricier services without a clear breakdown of what they would cost. But when consumers decided to downgrade to a more affordable H&R Block product, the FTC says the company had some aggravating – and unfair – surprises for them. First, they couldn’t downgrade without communicating directly with H&R Block’s customer service department. Second, after people had spent substantial time inputting their tax information and then decided to downgrade to a less expensive H&R Block filing product, the FTC says the company presented them with an unfair choice: pay for a more expensive product they didn’t want or need or H&R Block would wipe out nearly all of their already typed-in tax information and make them start from scratch.

And let’s be clear. The FTC alleges this wasn’t a system glitch. It was an intentional sales tactic to create a disincentive for consumers who wanted a more affordable option. The complaint charges that H&R Block retained the data for consumers who upgraded, but deleted the data for those who downgraded, forcing many consumers to choose between overpaying or losing all the information they had already entered.

Count I of the complaint challenges H&R Block’s policy of making consumers who want to downgrade communicate with its customer service department – an often time-consuming hoop the company didn’t require upgrading customers to jump through. Count II alleges that H&R Block’s tactic of requiring consumers either to pay for more expensive products they didn’t need or to have their data wiped out after hours of effort was an unfair practice, in violation of the FTC Act. Count III alleges that the company’s “free” filing claims are deceptive.

Even at this early stage, this is an important case for advertisers to follow.