D.C. Attorney General Brian L. Schwalb (D) said Wednesday that the tax preparation company Liberty Tax would pay more than 7,000 District residents whom it allegedly overcharged to settle a lawsuit filed in 2022.
The attorney general’s office sued Liberty, claiming the company’s “cash in a flash” promotion offered residents $50 for using its services to file between 2014 and 2021, according to a statement from the attorney general’s office. More than 7,300 customers who accepted the payment were charged up to $200 more for tax preparation, the statement said.
The company “entices” customers with the purported giveaway, according to a complaint filed in D.C. Superior Court in 2022, creating YouTube videos that invite customers to “Come and get your $50!” or that show a Liberty Tax sign-waver with a placard reading “Get $50 now.”
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“‘Cash in a Flash’ (‘CIF’) is a $50 cash perk ‘just for filing,’ that Liberty Tax deploys to entice consumers to use its tax preparation services,” the complaint said. “Yet, this upfront cash does not actually provide any true benefit to most consumers because Liberty Tax raises the cost of tax preparation for these consumers — rendering Liberty Tax’s statements about CIF false and misleading.”
In a statement, Liberty said it “is pleased to have resolved the matter with the D.C. Attorney General amicably, allowing us to shift our focus back to delivering top quality tax preparation services to our clients and support to our franchisees during this tax season.”
The company is the third-largest tax preparation company in the United States, according to the attorney general’s office, with two brick-and-mortar locations in Ward 7.
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To settle the suit, Liberty will pay $550,000 to D.C. customers and $200,000 in penalties to the District, according to a consent order. Customers will be compensated depending on how many times they used the promotion, receiving about $42 for each CIF payment they received, the order said.
In addition, Liberty will stop the promotion around the country and be subject to monitoring for five years, according to the order.
“Liberty Tax deceived thousands of taxpayers in DC with its bogus ‘cash in a flash’ promotion,” Schwalb said in a statement. “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.”
Jorge Tormes, a senior staff attorney at Tzedek DC, a legal services nonprofit that has worked with the attorney general on legislation, said in a statement that the settlement was “vitally important.”
“The investigation ... protects DC residents, especially working class residents of color, from deceitful practices designed to extract wealth from the Ward 7 community,” the statement said.
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