U.S. District Judge Edward Davila approved a $6.55 million settlement of two class-action lawsuits that claim Intuit's free edition of TurboTax included usurious "quadruple-digit interest rates."
Lead plaintiffs Tasha and Fredierick Smith filed a complaint against Intuit last year, alleging that the software maker violates the Truth in Lending Act (TILA) as well as California business and usury laws. When the couple used TurboTax in 2009, 2010, and 2011, they deferred paying the $86.90 fee to use the software each time and instead chose to have the amount deducted from their return. Intuit charged them another $29.95 for this "refund processing option," which the Smiths claimed amounted to more than 34 percent of the original fee. The complaint states, "Plaintiffs paid $29.95 for an approximate 14-day loan of $86.90. The APR, properly calculated in accordance with TILA, was an exorbitant quadruple-digit interest rate." The couple argued that Intuit's fee should be considered a refund anticipation loan, subject to interest-rate and finance-charge disclosure rules.
Davila disagreed and dismissed the action because customers never received any money from Intuit and, after allowing the Smiths to amend their complaint twice, he ordered the parties into mediation and signed off on the settlement on Oct. 1. The deal covers all users of TurboTax's refund processing service between 2008 and May 28, 2013, and incorporates a second class-action against Intuit that is currently pending in state court.