The Illinois attorney general’s office sued sued Mo’ Money Taxes, a troubled tax-preparation service and lender based in Memphis, Tenn., which has recently run into a buzzsaw of legal trouble and negative publicity in several states.
The suit, filed by Attorney General Lisa Madigan’s office in Cook County Circuit Court, accuses the company of slapping taxpayers with at least $800,000 in hidden fees and filing inaccurate tax returns without consumers’ authorization.
Her office urged consumers who have used Mo’ Money to contact the IRS immediately.
Mo’ Money advertises heavily to low-income taxpayers, offering them so called “tax refund anticipation” programs that give them a way to receive and spend refunds instantly via a high-cost loan from Mo’ Money.
Madigan said many consumers have not received their promised refund checks, despite fees that often total as much as $700 per person.
“While the promise of fast cash may be tempting,” Madigan said in a statement, “these heavily marketed refund services always end up costing taxpayers much more in the end.”
Attempts to reach Mo’ Money’s co-founders Derrick Robinson and Markey Granberry failed when calls to the company went unanswered.
Madigan’s office has received 76 complaints against Mo’ Money this year, her statement said, adding that consumers have also contacted the Better Business Bureau, the City of Chicago and the Chicago Police Department.
Madigan’s suit comes in the wake of a police investigation earlier this year in Norfolk, Va., prompted by a flood of complaints from consumers who hadn’t received their refund checks. Mo’ Money has closed its six locations in Norfolk, according to the Virginian-Pilot in Norfolk. A story in the Memphis Commerical Appeal said the company blamed computer problems for what it called a “temporary problem.”
In early March, continued problems incited U.S. Representatives Steve Cohen of Tennessee and Bobby Scott of Virginia to send a letter to U.S. Attorney General Eric Holder demanding a federal probe. The lawmakers also passed complaints to the Federal Bureau of Investigation and other agencies, according to the Commercial Appeal.
“We have been assured that the federal agencies will do everything in their power to assure that those citizens victimized are made whole and that there are no more victims,” Scott said.
Madigan issued a general warning that consumers need to watch out for predatory lending practices during tax season.
Tax-refund deals may seem attractive, she said, but refund anticipation loans come with interest rates running as high as 150 percent that can reduce a taxpayer’s refund by as much as 20 percent before they receive it.
A related product, refund anticipation checks, are offered to taxpayers who do not qualify for a loan and simply allow the taxpayer to cash a refund — using a check or a pre-loaded debit card — after the IRS deposits it in a temporary bank account. These products are similarly riddled with high costs, Madigan’s office said.
Madigan is working with lawmakers in Springfield to pass Senate Bill 3523, which would crack down on the high costs and fees associated with refund anticipation products. The bill also seeks to strengthen disclosure of what those fees really add up to.
Madigan said consumers who had tax returns processed by Mo’ Money should contact the Internal Revenue Service immediately at (800) 829-1040 or by visiting www.irs.gov.
She said taxpayers who have already received a refund from Mo’ Money should not to cash or deposit it before contacting the IRS. The danger is that cashing the check opens the taxpayer up to an IRS audit, which could lead to a demand that refund be returned.
Madigan’s office said taxpayers audited by the IRS may be eligible for free legal representation from one of the following organizations:
• Center for Economic Progress: (312) 252-0280
• Loyola University School of Law, Federal Tax Clinic: (312) 915-7176
• Prairie State Legal Services: (630) 690-2130 or toll-free (800) 690-2130
• Administer Justice: (847) 844-1100 or toll-free (877) 778-6006
Consumers with questions about state income tax returns prepared by Mo’ Money can contact the Illinois Department of Revenue at (800) 732-8866