Attorney General Bonta Secures Settlement Requiring Liberty Tax to Stop Deceptive Advertising

OAKLAND — California Attorney General Rob Bonta today announced a settlement with Liberty Tax (Liberty) for running deceptive advertisements that misled consumers into thinking they were getting a free advance on their tax refund when they were actually taking out a high-cost loan. These actions violated California law and a 2009 injunction obtained by the California Department of Justice following trial, which required Liberty to clearly disclose in every refund loan advertisement that the product is a loan. Under today’s settlement, which the court will enter as an amended judgment, Liberty must pay $150,000 in civil penalties and comply with enhanced disclosure requirements about its loan products.

“Liberty tax deceived hardworking families, eager for their tax refunds, into falling for high-priced loans. This is illegal and as the People’s Attorney, I will not stand for it,” said Attorney General Bonta. “This settlement prevents Liberty Tax from lying and misleading their customers in the future and serves as a warning to other tax preparation servicers: My office is watching, and we are prepared to go to the mat for California consumers."

Liberty provides tax preparation services directly to consumers, and as part of that, sells refund anticipation loan products, which are short-term loans with applicable fees secured by a consumer’s anticipated tax refund. 

In 2007, then Attorney General Brown sued Liberty, alleging that it deceptively advertised its refund anticipation loans by failing to clearly disclose that they were costly loans and not advances on consumers’ actual tax refunds. In 2009, Liberty was ordered to pay $1,161,699 in civil penalties and $135,866 in restitution and submit strong injunctive terms barring Liberty from deceptive advertising. Specifically, Liberty was ordered to clearly and “conspicuously” disclose in every refund loan advertisement that the product is a loan, and that fees and interest may apply.

Despite this court order, Liberty again began advertising “Easy Advance” and “Holiday Advance” refund anticipation loans online and in its stores without adequately disclosing that the products are loans. Today’s settlement imposes civil penalties for those violations and strengthens Liberty’s disclosure requirements. The new injunctive terms specifically define “conspicuous” in a number of advertising contexts, require Liberty to include the word “loan” in the name of each refund anticipation loan product, and require that Liberty use the full name of the loan product whenever the product is mentioned. This is intended to prevent marketing that might mislead consumers into thinking they are getting an advance on their tax refund when they are actually applying for a loan.

Attorney General Bonta is committed to standing up for Californians’ financial protection and their right to file taxes safely.

Last March, Attorney General Bonta issued a consumer alert with tips on preparing taxes safely, and Californians to file early, take actions to protect themselves online, and learn about free or low-cost tax filing opportunities. In May 2022, Attorney General Bonta, as part of a coalition of 51 attorneys general and with the Los Angeles City Attorney and Santa Clara County Counsel, announced a $141 million settlement against Intuit, resolving allegations that the California-based company deceptively advertised its “free” online TurboTax products. In May 2023, Attorney General Bonta  announced that consumers who were tricked by TurboTax’s owner Intuit into paying for free tax services would begin receiving checks. Californians received more than $12.2 million, distributed to the more than 400,000 consumers who were eligible for a free tax filing program and were instead deceived into paying to file their federal tax return.

The proposed judgment, which remains subject to court approval, is available here.