H&R Block Announces Plan to Open 1 Million Bank Accounts for Free And Significantly Cut the Cost of Refund Lending

H&R Block Inc. (NYSE: HRB) today announced plans to open low-costbank accounts for free for 1 million of its tax clients andsignificantly reduce the cost of refund anticipation loans for taxseason 2007.

At its annual meeting of shareholders, H&R Block Chairman and CEOMark A. Ernst outlined a four-part plan that includes a nextgeneration, low-cost bank account; new high-yield savings products;and enhanced financial education to better serve its tax clients.

"H&R Block has a long history of helping American families get themost from their financial lives," Ernst said. "The steps we're takingtoday build on that legacy by helping millions of our clients accessthe banking system in a unique way to reduce their costs and takeanother step toward a brighter financial future."

The company will utilize its nationwide network of 12,500 taxoffices to enable clients to open bank and savings accountsconveniently at tax time.

1. New Low-Cost Banking Solution

H&R Block has set a target to open 1 million, next generation bankaccounts for free to give clients the benefits of direct deposit oftheir income tax refund as well as easy bill payment and purchases,and ATM withdrawals without risk of overdraft fees. The new accountblends the features of a traditional bank account with the benefits ofa pre-paid card to offer secure, convenient and low-cost services thatmeet the needs of H&R Block's clients.

Accessed with the new H&R Block Emerald Pre-paid Card, this nextgeneration bank account will be opened for free and features easyaccount access, no overdraft fees, no minimum balance requirement, notransaction fees for purchases, FDIC insurance, and convenient monthlystatements. In addition, the bank card provides a way to avoid highcheck-cashing fees for the nearly 3 million H&R Block clients who donot have a bank account. The card account can also accept payroll andother deposits at thousands of retail locations nationwide.

"With direct deposit of a tax refund into an H&R Block Bankaccount, clients can receive their refunds in less than half the timeof a mailed IRS check," Ernst said. "And clients can avoid fees forrefund loans or check cashing that together can cost $145 or more justat tax time. With year-round use, added savings averaging $460annually are possible."

In reaction to H&R Block's announcement, Ellen Seidman, executivevice president of Shorebank Corp. and former director of the Office ofThrift Supervision said, "Using its understanding of the desire ofconsumers to combine the safety of an insured bank account withliquidity and pricing transparency, H&R Block Bank will provideconsumers who have traditionally not used bank accounts with access tolower-cost solutions at scale."

2. High-Yield Savings Solutions

In addition to its low-cost banking solution, H&R Block announcedtwo new savings accounts that will enable its clients to turn theirtax refunds into savings. At 5.25 percent annual percentage yield(APY), H&R Block's new Easy Savings Account and Easy IRA offer amongthe highest rates of return in the country for FDIC-insured deposits.

The Easy Savings Account, designed as a basic emergency fund,offers convenient access at ATMs. The Easy IRA enables clients to savefor retirement using a tax-advantaged account that makes it simple toclaim the Retirement Saver's Credit, a federal matching incentive forlow- and moderate-income savers.

Both accounts have no minimum balance requirement and no openingor annual account maintenance fees for H&R Block's retail tax clients.The annual fee is also waived for non-H&R Block clients who maintain a$300 minimum balance.

"For many Americans, the day they file their tax return is the oneday of the year that they have managed to accumulate a non-negligiblesum of money. As such, it represents a terrific opportunity togenerate some long-term savings," said Dr. Richard H. Thaler,professor of behavioral science and economics at the University ofChicago Graduate School of Business. "What H&R Block has done iscreate a structure in which taxpayers can take advantage of thatopportunity. By allowing them to open an account and directly deposita portion of their tax refund, reluctant savers are much more likelyto act. This creates a potentially powerful tool to help solve one ofthe most important problems facing our country."

3. Reducing the Cost of Refund Lending

H&R Block, in cooperation with its partner HSBC Taxpayer FinancialServices, will significantly reduce the cost of refund lending for theupcoming tax season.

For a $2,800 refund anticipation loan, which is the average loansize for H&R Block, the cost could be reduced more than 40 percentcompared to last year. This same $2,800 refund loan can cost as littleas $60, including a finance charge of less than 1.1 percent, when theloan is combined with a bank account. As an 11-day loan, the financecharge on this $2,800 loan translates to a 36 percent APR, which meetsbenchmarks suggested by many consumer advocates.

"Used in combination with an H&R Block Bank account, lower-costloans can be a bridge to entering the financial mainstream," Ernstsaid. "I'm hopeful that our action will trigger price cuts and reformsthroughout the RAL industry."

Today's action builds on past H&R Block efforts to improve refundlending. Over the last several years, the company has reduced refundlending fees, improved client disclosures and tax professionaltraining, incorporated suggestions from consumer advocates, andsupported stronger RAL regulation to ensure that consumers can makemore informed choices.

"Today's announcement represents a dramatic and profound stepforward in the tax preparation business for low and moderate incomeAmericans," said Steven Dow, executive director of Community ActionProject of Tulsa County, one of the nation's largest providers of freeservices for low-income taxpayers. "H&R Block's decision to promotesavings and simultaneously reduce the cost of banking services and thecost of loans is a monumental and welcome shift in the operatingphilosophy of the commercial tax preparation business."

4. Improving Financial Education and Advice

To expand its financial education and advice programs, the companywill upgrade its H&R Block Advantage Report, a free report thatcustomizes tax tips, budgeting, borrowing and savings information,alerts to government benefits, and action plans for each tax client.

"Many middle-income Americans have been left behind as traditionalfinancial institutions focus on those with higher incomes," Ernstsaid. "Tax time is a unique moment during which we can meet ourclients' distinct needs with planning and advice that's simple andactionable."

Steven Brobeck, executive director of the Consumer Federation ofAmerica, acknowledged H&R Block's efforts, saying, "The ConsumerFederation of America supports any of H&R Block's efforts that benefitlower-income households by lowering the cost of essential bankingservices, by providing new and effective savings opportunities, and byinforming clients how to lower banking costs and build personalwealth."

The company said it plans to introduce additional financial adviceand education tools for the 2007 tax season.

About H&R Block

H&R Block Inc. (NYSE: HRB) is a leading provider of tax,financial, mortgage, accounting and business consulting services andproducts. H&R Block is the world's largest tax services provider,having prepared more than 400 million tax returns since 1955. Thecompany and its subsidiaries generated revenues of $4.9 billion andnet income of $490 million in fiscal year 2006. The company operatesin four principal business segments: Tax Services (income taxpreparation and advice via in-office, online and software solutions);Mortgage Services (non-prime mortgage originations and loanservicing); Business Services (tax, accounting and consulting servicesfor midsized businesses); and Consumer Financial Services (investmentand financial advisory services, retail mortgage loans and bankingproducts). Headquartered in Kansas City, Mo., H&R Block markets itsservices and products under three leading brands - H&R Block, OptionOne and RSM McGladrey. For more information visit our Online PressCenter at www.hrblock.com.