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BASILE v. H&R BLOCK

August 1, 1995

SANDRA J. BASILE AND LAURA CLAVIN
v.
H&R BLOCK, INC., H&R BLOCK EASTERN TAX SERVICES, INC. AND MELLON BANK (DE) ASSOCIATION



The opinion of the court was delivered by: EDMUND V. LUDWIG

 Ludwig, J.

 August 1, 1995

 This action alleges violations of the Truth in Lending Act, 15 U.S.C. §§ 1601 et seq., state law violations of fraud, negligent misrepresentation, breach of fiduciary duty, the Pennsylvania Unfair Trade Practices and Consumer Protection Act, 73 Pa.C.S.A. § 201-2(4), and Delaware usury laws, Del. Code Ann. tit. 6, § 2301(a) (1975). *fn1" Jurisdiction is federal question. 28 U.S.C. § 1331. Defendants move for summary judgment as to all counts. By order of July 24, 1995 summary judgment was granted as to the federal question claims and issues; supplemental jurisdiction was relinquished, 28 U.S.C. § 1367(c); and the action remanded, 28 U.S.C. § 1447(c).

 From 1990 to the present defendant H&R Block, Inc. has offered a "Rapid Refund Program" utilizing electronic filing services. *fn2" One feature is a refund anticipation loan. Under this plan the customer would obtain a loan from Mellon Bank in the amount of the refund, and the refund would be sent directly from the IRS to the bank. *fn3" Defendant Mellon Bank's motion for summary judgment at 2. The bank charged $ 29 for processing the loan. Defendant H&R Block's motion for summary judgment at 4. A separate $ 25 or $ 35 *fn4" fee was charged by H&R Block for the electronic filing service. Id.

 According to the complaint, H&R Block's advertising misrepresented that the refund came directly from the IRS and was not a loan. Response to motion for summary judgment at 1-2. As a result, plaintiffs are alleged to have paid an inordinately high rate of interest and felt "taken advantage of and betrayed." Id. at 2. On April 23, 1993, having allegedly found that others were misled, plaintiffs filed this action in state court on behalf of all persons similarly situated. *fn5" On May 14, 1993 the action was removed to this court. The essence of the federal claim is that defendants' Truth in Lending Act disclosures were belated and incomplete. The claim that Mellon Bank's finance charges exceeded allowable limits under Pennsylvania's consumer protection law also raises a federal question.

 I.

 The legislative purpose of the Truth in Lending Act is to "assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available" and to avoid the "uninformed use of credit." 15 U.S.C. § 1601(a). Pursuant to the Act, the Federal Reserve Board issued Regulation Z, 12 C.F.R. § 226.1 et seq., 15 U.S.C. § 1604. For each transaction, the creditor is required to disclose the following information:

 
(a) the identity of the creditor making the disclosures;
 
(b) the "amount financed," using that term, and a brief description of the amount of credit provided to the consumer;
 
(c) (1) a separate written itemization of the amount financed, including:
 
(i) the amount of any proceeds distributed directly to the consumer,
 
(ii) the amount credited to the consumer's account with the creditor,
 
(iii) any amounts paid to other persons by the creditor on the consumer's behalf,
 
(iv) the prepaid finance charge;
 
(2) the creditor need not comply with (c)(1) if the creditor provides a statement that the consumer has the right to receive a written itemization of the amount financed, together with a space for the consumer to indicate ...

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