Virginia Beach-based Liberty Tax, the third-largest tax preparation company in the country, has agreed to settle a lawsuit filed last fall by the D.C. Office of the Attorney General, which accused the company of deceiving taxpayers who used its tax prep service with upfront cash incentives.
Liberty Tax will pay a total of $750,000 to settle the lawsuit, with $550,000 of the total as compensation for more than 7,300 D.C. residents the lawsuit said had been misled and overcharged for tax prep services. An additional $200,000 will be paid to the District
The allegations of misleading consumers involved a cash incentive program called “Cash in a Flash,” which was promoted heavily on Liberty Tax’s website, commercials and outside of its tax preparation offices. It promised $50 upfront with no strings attached for using Liberty Tax to prepare and file taxpayers’ returns.
The suit alleged that Liberty increased prices for customers who accepted the cash, charging those who took the upfront $50 up to $200 more for tax prep than customers who didn’t accept the cash.
Liberty Tax had used the promotion nationwide since 2014. Many of its brick-and-mortar offices are located in low income neighborhoods. Both of its offices in D.C. are in Ward 7.
As part of the settlement with D.C., Liberty Tax must permanently end its “Cash in a Flash” promotions across the country and is banned from creating new incentive programs that lead to higher prices paid by consumers.
Terms also require Liberty Tax to be subject to monitoring by the D.C. attorney general’s office for the next five years, including submitting all marketing and employee training materials.
“This settlement not only forces Liberty Tax to compensate every Washingtonian it unlawfully took advantage of, but also creates strong, nationwide legal guardrails that will protect taxpayers across the country,” said D.C. Attorney General Brian Schwalb.
Schwalb’s office posted a copy of the settlement.
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