Suit claims Liberty engaged in deceptive advertising and misleading product pricing
Washington, DC District Attorney Karl Racine announced this week that his office has filed suit against Liberty Tax alleging the tax preparation company engaged in aggressive promotion of a predatory cash advance product and manipulated product prices in a manner that was harmful to its customers.
The complaint alleges that Liberty Tax aggressively markets its services to low-income residents by offering them $50 in cash “just for filing,” but then secretly increases the cost of tax preparation for individuals who accept the cash payment. In the suit, OAG asserts that Liberty Tax’s deceptive advertising and predatory pricing practices harm vulnerable consumers and violate the District’s consumer protection laws.
“We filed this lawsuit to stop Liberty Tax from illegally preying on DC’s most vulnerable low-income residents. Now is the time for Liberty Tax to be held accountable for persistently and fraudulently tricking D.C. residents into overpaying for tax preparation,” said AG Racine. “Misleading consumers is illegal, and we won’t allow businesses to profit by cheating District residents. We also want to inform DC tax-filers of numerous resources that provide tax assistance for free—with volunteers trained and certified by the Internal Revenue Service. These free resources assist low-income residents, seniors, people with disabilities, and people with limited English proficiency with preparing their taxes each year.”
The suit against Liberty claims the company harmed DC residents by:
- Secretly increasing prices for consumers who receive “cash in a flash”: Liberty Tax misleadingly offers consumers $50 in cash “just for filing” their taxes—but does not disclose that consumers who accept the cash will be charged more than those who do not. On average (depending on which forms are filed), consumers who accept the $50 offered by Liberty Tax are then charged anywhere from $67 to $200 more for tax prep services than consumers who do not participate in the “cash in a flash” promotion.
- Falsely advertising cash payments with “no catch”: Liberty Tax misled consumers by claiming that the $50 upfront was a “perk” for doing business with the company and by claiming the payments were offered with “no catch.” In fact, the catch was that Liberty Tax was increasing prices for consumers who accepted upfront cash payments, more than wiping out the benefit of getting the cash.
- Overcharging thousands of DC consumers: Liberty Tax provided over 12,000 cash payments to District consumers as part of its “cash in a flash” promotion from 2015 to 2021—increasing the prices thousands of DC consumers paid for tax prep without their knowledge.
- Exploiting the most vulnerable low-income tax filers: Liberty Tax aggressively advertises immediate cash payments to lure customers, including by advertising on the street in the lower-income DC neighborhoods where its stores are located. And, on average, it increases charges the most for its most disadvantaged consumers who accept these cash payments. Liberty tax charged individuals who file simple returns (with only a 1040 and a W2) an average of $75 more if they accepted the upfront $50 in cash. However, Liberty Tax charged individuals who received the Earned Income Tax Credit (EITC)—a credit aimed at filers with the lowest-paying jobs—an average of $93 to over $200 more than EITC recipients who did not accept the $50 cash.
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