|
NEWARK
– The State Attorney General and Division
of Consumer Affairs filed suit today, claiming
that a New Jersey tax preparation firm lured
consumers into purchasing loans with extremely
high interest rates by deceptively advertising
that these products were fast tax refunds.
The
state’s complaint, filed in State
Superior Court in Jersey City, alleges that
defendants The Malqui Corporation, Malqui
Financial Service Corporation and Malqui
Financial Group (“Malqui”) violated
the state’s Consumer Fraud Act and
telemarketing regulations.
“New
Jersey is cracking down on deceptive advertising
used by companies that take advantage of
hardworking people by misrepresenting refund
anticipation loans as straight tax refunds,”
Attorney General Rabner said. “In
brokering these products, firms like Malqui
must clearly tell consumers about these
loan’s high interest and fees, which
shrink refunds that taxpayers could get
quickly from the IRS for free. We have brought
this action to stop Malqui’s practices
and to seek restitution for consumers.”
Refund
anticipation loans (RALs) have been touted
as providing fast cash to taxpayers or as
a short cut to obtaining a refund. In reality,
they are extremely high interest short-term
loans secured by taxpayer’s expected
refunds which must be repaid regardless
of the amount of money a taxpayer actually
gets back from the government.
A
2007 study by the Consumer Federation of
America and National Consumer Law Center
found that U.S. consumers paid more than
$1 billion in loan charges and fees for
refund anticipation loans. The study also
found that refund anticipation loans are
targeted at the working poor, especially
taxpayers eligible for the Earned Income
Tax Credit, the largest federal anti-poverty
program.
“Malqui
bilked consumers, many of modest financial
means, out of their full tax refunds,’’
Acting Director Nolan said. “Money
that should have ended up in the consumer’s
pocket went to Malqui through fees and charges.
Consumers were not given all the facts and
some may not have signed up for these loans
if there had been full disclosure as our
laws require.”
Malqui
allegedly violated the state’s Consumer
Fraud Act by using unconscionable commercial
practices in connection with the sale and
advertisement of its services, making misrepresentation
in the sale and advertisement of its services,
and by knowingly concealing, suppressing
or omitting material facts. These alleged
violations include:
-
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;
-
Marketing and brokering RALs and similar
financial products as “fast”
without providing consumers any point
of reference with which to judge the relative
speed of such products;
-
Using its position to gain the trust of
consumers in connection with preparation
of federal and state tax returns and then
deceptively marketing and brokering RALs
and similar financial products that enriched
Malqui while being contrary to the best
financial interest of consumers;
-
Misrepresenting RALs and similar financial
products as income tax refunds;
-
Misrepresenting RALs and similar financial
products to consumers as “your money”;
- Misrepresenting
the amount of time a consumer could expect
to wait for their refund from the IRS;
-
Concealing that RALs and similar financial
products were in fact interest bearing
loans;
-
Concealing fees associated with RALs and
similar financial products;
-
Concealing that consumers would be liable
for fees and interest on RALs and similar
financial products regardless of whether
a consumer received his or her tax refund
in the time and/or amount the consumer
expected the refund;
-
Concealing Malqui’s earned income
on the brokerage of RALs and similar financial
products in addition to fees paid for
tax return preparation services;
-
Omitting the fact that all fees associated
with RALs and similar financial products
are taken from a consumer’s tax
refund;
-
Concealing terms and conditions associated
with the purchase of an RAL or similar
financial product; and
-
Concealing that RALs and similar financial
products contain cross-collection agreements
whereby a consumer’s debts to certain
creditors are paid to those creditors
directly from the consumer’s tax
refund regardless of whether such payments
leave the consumer with any remaining
refund.
Malqui
also allegedly violated the state law by
conducting an unregistered telemarketing
operation.
Deputy
Attorney General Jody A. Carbone is representing
the state in this matter.
Consumers who believe they may be victims
can contact Consumer Affairs to file a complaint.
Consumer Affairs can be contacted at 800-242-5846
(toll free within New Jersey) or at
973-504-6200.
#
# #
|
