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NEWARK
– A tax preparation firm sued by the
Office of the Attorney General and its Division
of Consumer Affairs has been ordered to pay
$1.86 million in penalties and to repay $1.64
million to consumers who were deceptively
sold high-cost refund anticipation loans (RALs).
Superior
Court Judge Thomas P. Olivieri, Presiding
Judge of the Chancery Division, General Equity,
of the Superior Court for Hudson County has
ruled that defendants Malqui Financial Group,
Inc. and Fast Tax Express Corp., both of which
do business as “Malqui Tax,” and
owner Ceasar B. Malqui were liable for hundreds
of Consumer Fraud Act violations arising from
their unconscionable, deceptive sales of RALs
to New Jersey’s working poor.
“We
will not permit tax preparers to victimize
consumers with deceptive claims of ‘instant
tax refunds’ when what they are really
getting are costly loans paid from their tax
refunds” Attorney General Anne
Milgram said. “I am pleased that
the Court has held those who perpetrated this
scam accountable for their illegal actions.”
Ceasar
Malqui, who resides in Paterson, is permanently
enjoined from owning or managing any business
that sells RALs and he cannot advertise or
sell RALs himself. The Court ordered Malqui’s
companies to adopt a series of best practices
designed to ensure that consumers are expressly
told about RALs' costs, conditions and all
no-cost refund options offered by the IRS.
The Court also voided Malqui’s fraudulent
sale of assets from Malqui Financial Group,
Inc. to Fast Tax Express Corp., which occurred
after the state filed its lawsuit.
“The
sale and transfer of assets between companies
that he controlled was a failed attempt by
Ceasar Malqui to avoid justice,”
said David Szuchman, Consumer Affairs Director.
“This attempted deception failed,
just as his deceptions in marketing RALs to
consumers were uncovered and found to be illegal.”
The
$1.64 million in consumer restitution is based
on a $134 document preparation fee and $15
service bureau fee that 10,980 customers each
paid to Malqui in Calendar Years 2006 and
2007. These charges were not disclosed to
consumers, despite Malqui’s advertisements
which touted “no hidden fees.”
A
RAL is a high-cost loan that is secured by
the taxpayer’s anticipated tax refund.
RALs can carry triple digit interest rates,
hidden fees and may expose consumers to unpaid
debt, if their tax refund is not as much as
expected.
A
study by the Consumer Federation of America
and National Consumer Law Center found that
8.67 million U.S. consumers paid about $900
million in loan charges and fees for RALs
in 2007.
The
state sued the defendants in March, 2007,
alleging that Malqui and his companies violated
the state’s Consumer Fraud Act by using
unconscionable commercial practices in connection
with the sale and advertisement of its services,
making misrepresentations in the sale and
advertisement of its services, and by knowingly
concealing, suppressing or omitting material
facts.
Malqui’s
specific violations included the following:
-
Advertising and selling RALs and similar
financial products as income tax refunds;
- Deceptively
advertising RALs as loans in English, while
describing them as refunds in Spanish;
-
Marketing and brokering RALs and similar
financial products in a manner likely to
confuse taxpayers into believing that such
products are a way to quickly receive tax
refunds from the IRS;
-
Advertising RALs with no hidden fees then
charging undisclosed fees for these products;
-
Deceptively touting the speed with which
Malqui could obtain refunds for consumers
while actually selling RALs; and
- Misrepresenting
to consumers that they could get a loan
in the amount of their anticipated tax refund,
when the proceeds of RALs are actually far
less after fees and finance charges.
The
Court found that Malqui and his companies
targeted consumers eligible for the Earned
Income Tax Credit, the federal government’s
largest anti-poverty program. Malqui at one
time operated 24 locations, though some have
closed since the state filed its lawsuit.
Defendant Malqui Financial Group Inc. filed
for bankruptcy protection last year.
In
a related matter, Attorney General Milgram
and Director Szuchman this February announced
that 38 tax preparation firms statewide had
been cited for false advertising in offering
“same day” tax refunds
that in reality were RALs.
Assistant
Attorney General James J. Savage and Deputy
Attorneys General Isabella T. Stempler and
Joshua Rabinowitz represented the state in
this matter.
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