Military Lending Act Lawsuits: Did Your Tax Refund Advance Contain Illegal Loan Terms?

If you or your spouse was an active-duty service member at the time you received a tax refund advance from TurboTax, Jackson Hewitt or H&R Block, it’s possible that your contract was illegal and unenforceable—and that you could be owed money back as a result.

Attorneys working with ClassAction.org have reason to suspect that the tax refund loans offered by these companies may have run afoul of a federal law specifically designed to protect active-duty service members and their families – and that this makes the agreements void from the start.

Now, attorneys are investigating whether service members could file class action lawsuits against the tax preparers over possible violations of the Military Lending Act and seek recovery of their full loan amounts.

Military Lending Act: How Could My Rights Have Been Violated?

The Military Lending Act (MLA) was enacted in 2006 and implemented by the Department of Defense to protect active-duty service members and their families from certain lending practices. Under the Act, military members and their dependents are entitled to lower interest rate caps, special disclosures and more beneficial loan terms than a normal consumer.

Specifically, it’s suspected that the loan contracts contained arbitration clauses and/or class action lawsuit waivers when they shouldn’t have. Under the MLA, it is unlawful for a creditor to require borrowers to submit to mandatory arbitration or waive their right to legal recourse under any other applicable state or federal law.

It’s also believed that the tax preparers may have failed to provide all disclosures required by the MLA.

Loan contracts that don’t comply with the MLA are considered void from their inception – as if they never existed.

Lawsuits have previously been filed over the inclusion of arbitration clauses in loan agreements offered to service members and the lack of MLA-required disclosures. For instance, in February 2024, a Georgia resident whose spouse is in the U.S. Army claimed TitleMax extended to her two pawn title loans, the agreements for which included a class action ban, binding arbitration clause and waiver of jury trial. The proposed class action lawsuit also claimed the woman – and others like her – weren’t provided with mandatory MLA disclosures.

How Could an MLA Class Action Lawsuit Help?

If filed and successful, class action lawsuits could allow service members to recover some of the money they borrowed and had to pay back to their tax preparer as part of their loan. Under the MLA, borrowers are entitled to “actual damage[s]…but not less than $500 for each violation.”

A successful case could also force the companies to make sure their tax advance products comply with all provisions of the MLA.

Before commenting, please review our comment policy.