What They Actually Stole From People Who Serve

Joshua Montgomery has spent more than 17 years in the United States Navy. That means 17 years of signing over the legal right to quit a job, 17 years of being subject to military discipline for bouncing a check, 17 years of deployments, 17 years of maintaining a security clearance, 17 years of being told that financial misconduct can end a military career. He likely did tours in places where the United States government decided bombs should fall. He paid his taxes every year. He went to H&R Block to get help filing them.

And H&R Block handed him a loan contract with a 667% effective interest rate hidden behind a label that said “0% APR.”

This is the part of the story that doesn’t fit inside a court filing. H&R Block is not some back-alley operation. It is one of the most recognizable consumer brands in the United States, with offices nationwide, a massive marketing budget, and a business model built on trust. People who are overwhelmed by tax forms, people who don’t have accountants or lawyers, people who are stretched thin and just need their refund a little faster than the IRS will send it, those are the people H&R Block targets. And within that already-vulnerable population, H&R Block specifically pushed lending products at active-duty service members and their families.

The Department of Defense understood exactly why this happens. Service members have guaranteed steady income from the federal government. They are legally required to maintain bank accounts for direct deposit of military pay. They are bound by the Uniform Code of Military Justice, which means a bounced check is not just a financial problem; it is a potential disciplinary event. A predatory lender who locks down a service member’s tax refund before it arrives has created a situation where the borrower essentially cannot say no to repayment, and cannot fight back without risking their career. The complaint quotes the DoD’s own 2006 research confirming that lenders deliberately set up shop near military bases because of all these advantages.

The damage is layered. A service member trapped in one of these debt cycles faces not just the immediate financial drain of illegal fees. The complaint makes clear that documented history of financial hardship can cost a service member their security clearance, which directly ends their ability to do their job. It costs promotions. It has, in documented cases, cost careers through disciplinary action up to and including separation from service. H&R Block’s loan product is not just extracting money. It is extracting the future.

There is also something uniquely insulting about the arbitration clauses embedded in these contracts. H&R Block not only charged illegal rates, it made borrowers sign away their right to sue in court, their right to a jury trial, and their right to join a class action, all of which are explicitly illegal under the MLA. The company knew, or should have known, that these clauses were void the moment they were used with a military borrower. They included them anyway. The message those clauses send is: even if we break the law, we are going to make fighting back as hard as possible for you.

Chief Petty Officer Montgomery filed this lawsuit. Most service members in his position won’t, because they don’t know their rights, because they are deployed, because they are afraid of what fighting a large company will do to their career, or because the dollar amounts involved in any single loan feel too small to justify the fight. That is precisely how H&R Block built this product. The class action exists because the only way to make the math work against a corporation is to count everyone together.

What the Documents Actually Say

Every claim in this story comes directly from the court filing and the federal government research it cites. Here is the language, unparaphrased.

“Active-duty military personnel are three times more likely than civilians to have taken out a payday loan, with such loans costing service members over $80 million in abusive fees annually as of 2005.”
— DoD Report on Predatory Lending Practices Directed at Members of the Armed Forces and Their Dependents (Aug. 9, 2006), cited in Complaint ¶ 31

• This is a federal government finding, not an advocacy estimate. The DoD conducted a formal investigation and concluded that the military population was being systematically looted at three times the civilian rate.
• The $80 million figure is from 2005 alone, before the explosion of digital tax refund advance products. The current scale of harm is almost certainly larger.

“Predatory lenders seek out young and financially inexperienced borrowers who have bank accounts and steady jobs, but also have little in savings, flawed credit or have hit their credit limit. These borrowers are less likely to weigh the predatory loan against other opportunities and are less likely to be concerned about the consequences of taking the loan.”
— DoD Report, cited in Complaint ¶ 51(1)

• This is a profile. The DoD wrote it to describe payday lenders in 2006. The complaint argues it describes H&R Block’s Refund Advance Loan product precisely.
• Service members fit this profile structurally: they are often young, frequently have limited savings, and their guaranteed military income makes them appear creditworthy even under financial stress.

“High interest loans, whether provided as a payday loan, military installment loan, or as a result of unscrupulous automobile financing can leave a service member with enormous debt, family problems, difficulty maintaining personal readiness and a tarnished career.”
— DoD Report, cited in Complaint ¶ 52

• The DoD is describing these loans as a national security and military readiness issue, not just a consumer protection issue. Financial distress degrades a soldier’s or sailor’s ability to perform their duties.
• The complaint connects this directly to H&R Block’s products by arguing they function identically to the predatory instruments the DoD was researching.

“Some service member victims of payday and other lenders experienced disciplinary action (ranging from reprimands to ‘loss of promotions and separation from the military’) as a result of their financial hardship.”
— DoD Report, cited in Complaint ¶ 53

• This documents that debt traps created by predatory lenders have directly ended military careers. The debt itself is the first harm; the disciplinary consequences are the second, compounding harm.
• Under the Uniform Code of Military Justice, financial misconduct such as bouncing checks or failing to pay debts is a disciplinable offense. Lenders who know this and still target service members are weaponizing the military legal system against the borrowers.

“Although Defendants advertise the Refund Advance Loan as a ‘0% APR’ loan, the product’s structure and required ancillary services cause the MAPR to far exceed the MLA’s 36% cap for Covered Borrowers.”
— Complaint ¶ 16

• The 0% APR claim is H&R Block’s own marketing language. The complaint argues this label is legally irrelevant because the Military Lending Act requires calculation of the Military Annual Percentage Rate (MAPR), which must include all fees tied to the loan, not just the nominal interest rate.
• By separating the loan from its mandatory ancillary fees and labeling each piece separately, H&R Block created a structure designed to obscure the true cost of credit from borrowers and, potentially, from regulators.

“A Refund Advance Loan is a loan; it is not a tax refund.”
— H&R Block’s own “Refund Advance Loan Disclosures,” quoted in Complaint ¶ 23 (described as appearing “in bold” on the first page)

• H&R Block’s own disclosure document confirms this is a loan, which means the MLA’s protections apply. The complaint uses H&R Block’s own paperwork to establish that the company cannot claim ignorance about the product’s legal classification.
• The complaint notes: “Defendants agree that its products constitute a loan.” This admission is significant because it forecloses any argument that the Refund Advance is somehow exempt from lending law.

The 0% Lie: Marketing vs. Federal Law

H&R Block constructed a product that tells borrowers one thing and does another. The gap between the advertised product and the legally required disclosure is the entire ballgame.

Who Gets Hurt and How the Damage Spreads

Public Health: Financial Stress as a Weapon

The harm from predatory military lending compounds through a service member’s entire life system. The DoD documented these effects in formal findings.

• Service members trapped in debt cycles face documented “difficulty maintaining personal readiness,” which the DoD defines as the baseline physical and mental capacity to perform military duties. A person drowning in fees and overdraft spirals is not performing at full capacity in environments where performance failures cost lives.
• The complaint documents that financial hardship from loans like H&R Block’s has resulted in military disciplinary action, “ranging from reprimands to loss of promotions and separation from the military.” The financial injury triggers a separate, career-ending institutional injury.
• Security clearances can be suspended or revoked when a service member demonstrates financial instability. Loss of a clearance effectively ends many military careers, particularly in technical and intelligence roles like Chief Petty Officer Joshua Montgomery’s assignment at Naval Information Warfare Center Pacific.
• The check-holding and electronic account control structure embedded in H&R Block’s product means military borrowers face the threat of a Uniform Code of Military Justice violation for failing to maintain sufficient funds. The loan product exploits the UCMJ as a collection mechanism by design.
• The complaint cites DoD research showing that “family problems” are a documented consequence of these debt traps. Financial strain is a leading contributor to divorce, domestic conflict, and housing instability, all of which fall disproportionately on military families who already absorb the stress of deployment, relocation, and separation.

Economic Inequality: A Tiered System Built on Veteran Trust

H&R Block’s product concentrates the most severe financial harm on the people with the least power to fight back: lower-income service members taking out smaller loans.

• The MAPR is inversely proportional to loan size. A $250 loan carries a 667.4% MAPR while a $750 loan carries 222.5%. This means the most financially vulnerable borrowers, those who can only afford to borrow the smallest amounts, are charged the highest annualized rates. The fee structure is regressive by design.
• The required ancillary account structure, including the Emerald Prepaid Mastercard and Refund Transfer accounts, creates a closed loop where H&R Block extracts fees from both the loan and the account simultaneously. The borrower cannot access the loan proceeds without the account, and the account charges fees every time the borrower uses their own money.
• Lower-enlisted service members and those in early-career stages are the primary targets. The DoD found that predatory lenders specifically seek “young and financially inexperienced borrowers,” and military bases are disproportionately populated by exactly this demographic. A 19-year-old E-2 in San Diego taking out a $250 Refund Advance Loan was, according to this complaint, being charged an effective 667% interest rate.
• The proposed class could encompass tens or hundreds of thousands of service members and their dependents. Each paid $64 in fees on a short-term loan, each had their refund seized before receipt, and each signed a contract containing illegal arbitration clauses. At $500 per violation in statutory damages, the potential exposure for H&R Block is enormous, which is exactly why the arbitration clauses were there in the first place.
• The Servicemember Civil Relief Act extends the statute of limitations for all active-duty members, meaning H&R Block cannot rely on the passage of time to escape liability for service members still on active duty when the suit was filed. The legal exposure extends backward across every year these products were offered.

What $64 in Illegal Fees Actually Costs

Who to Contact, Who to Watch, and How to Fight Back

The lawsuit names four defendants with specific corporate roles. Every one of them is still operating these products today.

• H&R Block, Inc. — Parent corporation, Kansas City, Missouri. The brand at the top of the chain.
• HRB Tax Group, Inc. — Missouri subsidiary registered to do business in California. The entity that actually extends loan agreements to consumers including covered military members.
• Pathward, N.A. (formerly MetaBank) — Federal bank in Sioux Falls, South Dakota. Issues all required accounts and controls the deposit accounts through which loan proceeds are delivered and refunds are seized.
• Emerald Financial Services, LLC — Delaware LLC, Kansas City, Missouri. Manages the Emerald Advance Loan product and the Emerald Prepaid Mastercard accounts.

Regulatory Watchlist

• Consumer Financial Protection Bureau (CFPB): The CFPB has enforcement authority over the Military Lending Act and has historically brought actions against predatory lenders targeting service members. File a complaint at consumerfinance.gov/complaint if you are an affected service member.
• Department of Defense, Office of the Under Secretary of Defense for Personnel and Readiness: The DoD has specific authority to define covered borrowers under the MLA and has the standing to advocate for regulatory changes when civilian financial institutions exploit military populations.
• Office of the Comptroller of the Currency (OCC): Pathward, N.A. is a federally chartered national bank. The OCC supervises national banks and has the authority to investigate whether Pathward’s account structure violates federal banking and consumer protection law.
• Federal Trade Commission (FTC): Has broad authority over deceptive advertising practices in financial products. H&R Block’s “0% APR / $0 fees” marketing, if found to be deceptive under the MLA calculation, is also potentially actionable under FTC deceptive advertising standards.
• Department of Justice, Civil Rights Division: The systematic targeting of a federally protected class (active-duty military) with illegal loan products is a matter of federal civil rights enforcement in addition to consumer protection law.

Mutual Aid, Organizing, and Direct Action

• If you are an active-duty service member or a military dependent who used H&R Block’s Refund Advance Loan or Emerald Advance Loan, contact Almeida Law Group (victor@almeidalawgroup.com, 562-534-5907) or Peiffer Wolf Carr Kane Conway & Wise LLP (bwise@peifferwolf.com) to determine if you are a class member.
• Military legal assistance offices (JAG) on every major installation offer free legal counseling. If you have taken out any tax refund advance loan and paid fees you were not expecting, a JAG attorney can review your rights under the MLA at no cost.
• Navy-Marine Corps Relief Society, Army Emergency Relief, and Air Force Aid Society all provide zero-interest emergency loans to service members, the kind H&R Block is supposed to be competing against. Use them instead.
• Share this lawsuit with every service member in your chain. The proposed class includes tens or hundreds of thousands of people who were likely charged the same illegal fees and signed the same illegal contracts. Most of them don’t know they have legal rights because H&R Block’s contract told them they didn’t.
• Contact your Congressional representatives. The MLA exists because Congress passed it. Enforce it by demanding that the CFPB, OCC, and DOJ treat Military Lending Act violations as the federal law violations they are, not civil matters to be settled quietly.
• If you are a tax professional or work in financial services, refuse to use or refer clients to products that embed mandatory arbitration clauses and hidden fee structures. There are free and low-cost alternatives to H&R Block’s advance loan products: IRS Free File, VITA sites, and credit union emergency loan programs all exist precisely for this reason.