Podcast - FTC Challenges H&R Block's Marketing and Data Practices

Good day and welcome to another podcast of Clearly Conspicuous. As we've noticed in previous sessions, our goals in these podcasts is to make you succeed in this environment, make you aware of what's going on with federal and state consumer protection agencies, and give you practical tips for success. It's a privilege to be with you today.

FTC Accuses H&R Block of Deleting Consumer Data, Making Downgrades a Hassle

Today we discuss the FTC action against H&R Block. The Federal Trade Commission is taking action against tax preparation company H&R Block for allegedly unfairly deleting customers' tax data and requiring them to contact customer service when they downgrade to more affordable online products, and deceptively marketing their products as "free," when they were not free for many consumers. Sam Levine, the director of the FTC's Bureau of Consumer Protection said, "H&R Block designed its online products to present an obstacle course of tedious challenges to consumers, pressuring them into overpaying for its products. Today's action demonstrates the companies using coercive techniques that harm consumers can expect to hear from the FTC."

In an administrative complaint, the FTC staff alleges that H&R Block's online tax filing products leads consumers into higher-cost products made for more complicated tax filings, despite many consumers not needing the additional tax forms and schedules offered by those products. In addition, H&R Block allegedly failed to clearly explain which of its products cover what forms, schedules or tax situations, leading many consumers to start completing their tax returns in products that are more expensive than they need. When consumers later realized they did not need or want those more expensive products, though, H&R Block presented them with a series of time-consuming challenges when attempting to downgrade after already spending substantial time entering their tax information. Specifically, when consumers choose to downgrade, H&R Block requires consumers to contact its customer support via chat or phone. Then its system deletes all the tax data the consumers have entered, requiring them to start their tax returns from scratch, creating a significant disincentive to downgrading. This stands in contrast to the upgrade process where consumers' data seamlessly moves to the more expensive product instantly. Similarly, the complaint alleges that while consumers can upgrade without contacting H&R Block customer service, the opposite is true for the downgrade process. Since at least 2014, consumers attempting to downgrade had to reach out to the company to request a downgrade, a process that has often been frustrating and time-consuming to consumers.

Consumer Complaints of Deceptive Marketing Practices

In addition to the consumers' practices regarding downgrades, the complaint also alleges the company is engaged in deceptive advertising for years, marketing its online tax preparation services as free when many consumers are not eligible to use the company's free products. The complaint outlines a number of advertisements that H&R Block puts on TV and online promoting that consumers can file for free with the company. The ads contain language, saying sometimes only in fine print, the free offer applies only to "simple returns." The ads, however, do not explain what a "simple return" is. And the complaint notes that H&R Block has changed its definition of a "simple return" multiple times in recent years. According to the complaint, the company was aware of consumers' frustrations and confusion with these misleading advertisements.

As a final note, the commission issues an administrative complaint when it has a reason to believe that the law has been or is being violated. And it appears to the commission that a proceeding is in the public interest. The issuance of an administrative complaint marks the beginning of a proceeding in which the allegations will be tried in a formal hearing before an administrative law judge.

Concluding Thoughts

So, here's the key takeaway. The FTC is not shy about targeting big brands or established companies. Advertising using key buzz terms like "free" has stricter scrutiny. It is noteworthy that consumer inconvenience and consumer hassles now constitutes a harm of interest to the FTC. So please stay tuned to further programs as we identify and address the key issues and developments and provide strategies for success. I wish you continued success and a meaningful day. Thank you.