FTC Action Stops H&R Block’s Unfair Downgrading Practices and Deceptive Promises of ‘Free’ Filing

A Federal Trade Commission lawsuit is leading to changes for consumers who use H&R Block's do-it-yourself online tax filing products. A proposed FTC settlement would stop H&R Block from unfairly requiring consumers seeking to downgrade to a cheaper H&R Block product to contact customer service, from unfairly deleting users'previously entered data and from making deceptive claims about "free" tax filing.

The tax-filing company has agreed to a proposed settlementthat will require the company to make a number of changes for the 2025 tax filing season in addition to longer-term changes. The settlement would also require the company to pay $7 million to the FTC to be used to redress consumers harmed by the company's unlawful practices.

"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," said Samuel Levine, Director of the FTC's Bureau of Consumer Protection. "The FTC's action today will help lower the stress and expense of tax season for millions of taxpayers."

The FTC filed an administrative lawsuit against H&R Block in February 2024, charging that the company deceptively advertised that its online tax filing products were "free" when many-if not most-consumers could not actually file for free.

H&R Block also failed to explain clearly which of its products cover what forms, schedules, or tax situations, leading many consumers to spend time completing their tax returns in products that were more expensive than they needed. When consumers later attempted to downgrade to a less expensive product after realizing they did not need or want those more expensive products, H&R Block presented them with a series of time-consuming obstacles. First, consumers had to contact customer service by phone or chat to request to downgrade, which was time-consuming. Then, when consumers did downgrade, H&R Block deleted the data they had previously entered, costing consumers additional time to re-enter their tax information in the downgraded product. Consumers who sought to upgrade encountered no such obstacles.

The proposed settlement would require H&R Block to stop its illegal conduct by making it easier for consumers to downgrade products and by eliminating its practice of completely deleting consumers' previously entered data. By February 15, 2025, the company will be required to allow consumers to downgrade products without spending time contacting customer service.

In addition to the $7 million payment, the proposed order would also require H&R Block, by the 2026 tax filing season, to stop completely deleting consumers' previously entered information. Specifically, when a consumer downgrades back to the product they upgraded from, H&R Block must ensure that the consumer returns to the same point in filing where they were when they upgraded, saving consumers significant time and effort. H&R Block must also provide an easily noticeable and always available way for consumers to downgrade without having to call customer service or chat with a live customer service agent.

The proposed order also would require H&R Block to disclose in its "free" advertising either the percentage of taxpayers who are actually eligible to use any "free" products or that the majority of taxpayers do not qualify.

The Commission vote to accept the consent agreement was 5-0. Commissioner Andrew Ferguson issued a statement. Commissioner Melissa Holyoak concurs in acceptance of the proposed consent agreement for public comment but notes that such acceptance does not constitute her final approval. The FTC will publish a description of the consent agreement package in the Federal Register soon. The agreement will be subject to public comment for 30 days after the package is published in the Federal Register, after which the Commission will decide whether to make the proposed consent order final. Instructions for filing comments appear in the published notice. Once processed, comments will be posted on Regulations.gov.

NOTE: When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $51,744.

The staff attorneys on this matter are Claire Wack, Simon Barth, Christopher E. Brown, and Josh Doan of the FTC's Bureau of Consumer Protection.