HR Block 2005 Annual Report Download - page 67

Federal Trade Commission regulations adopted thereunder Many states have statutes requiring the licensing of persons
require income tax preparers to adopt and disclose consumer offering contracts of insurance. We have received from certain
privacy policies, and provide consumers a reasonable opportunity state insurance regulators inquiries about our POM guarantee
to ‘‘opt-out’’ of having personal information disclosed to program and the applicability of the state insurance statutes. In
unaffiliated third parties for marketing purposes. Some states states where the inquiries are closed, the regulators affirmed our
have adopted or proposed strict ‘‘opt-in’’ requirements in position that the POM guarantee is not a contract of insurance
connection with use or disclosure of consumer information. and is therefore not subject to state insurance licensing laws. In
We believe the federal legislation regulating commercial tax the few states where inquiries are pending, we believe there are
return preparers and consumer privacy has not had and will not no insurance laws under which the POM guarantee constitutes a
have a material adverse effect on the operations of H&R Block. In contract of insurance. There can be no assurances, however, that
addition, no present state statutes of this nature have had a the product, or other similar products we may offer in the future,
material adverse effect on our business. We cannot, however, will not be scrutinized as potential insurance products and held
predict what the effect may be of the enactment of new statutes to be subject to various insurance laws and regulations.
or adoption of new regulations. Many of our income tax courses are regulated and licensed in
The federal government regulates the electronic filing of select states. Failure to obtain a tax school license could limit our
income tax returns in part by requiring individuals and businesses ability to develop interest in tax preparation as a career or obtain
to be accepted into the electronic filing program. Once accepted, qualified tax professionals.
electronic filers must comply with all publications and notices of We believe the federal, state and local laws and legislation
the IRS applicable to electronic filing, provide certain information regulating electronic filing, RALs and the facilitation of RALs,
to the taxpayer, comply with advertising standards for electronic loan brokers, credit services, credit repair services, insurance
filers, and be subjected to possible monitoring by the IRS, products, and proprietary schools have not, and will not in the
penalties for disclosure or use of income tax return preparation future, have a material adverse effect on our operations. We
and other preparer penalties, and suspension from the electronic cannot predict, however, what the effect may be of the enactment
filing program. States that have adopted electronic filing of new statutes or the adoption of new regulations pertaining to
programs for state income tax returns have also enacted laws these matters.
regulating electronic filers and the advertising and offering of As noted above under ‘‘Owned and Franchised Offices,’’ many
electronic filing services. of the income tax return preparation offices operating in the
Federal statutes and regulations also regulate an electronic U.S. under the name ‘‘H&R Block’’ are operated by franchisees.
filer’s involvement in RALs. Electronic filers must clearly explain Certain aspects of the franchisor/franchisee relationship have
the RAL is a loan and not a substitute for or a quicker way of been the subject of regulation by the Federal Trade Commission
receiving an income tax refund. Federal laws place restrictions and by various states. The extent of regulation varies, but relates
on the fees an electronic filer may charge in connection with primarily to disclosures to be made in connection with the grant
RALs. In addition, some states and localities have enacted laws of franchises and limitations on termination by the franchisor
and adopted regulations for RAL facilitators and/or the under the franchise agreement. To date, no such regulation has
advertising of RALs. There are also many states that have statutes materially affected our business. We cannot predict, however, the
regulating, through licensing and other requirements, the effect of applicable statutes or regulations that may be enacted or
activities of brokering loans, providing credit services and adopted in the future.
offering ‘‘credit repair’’ services to consumers for a fee We also seek to determine the applicability of all government
(‘‘Loan Activity Statutes’’). We believe the procedures under and self-regulatory organization statutes, ordinances, rules and
which we facilitate RALs are structured so our activities are not regulations in the international countries in which we operate
included within the scope of the activities regulated by these (collectively, ‘‘Foreign Laws’’) and to comply with these Foreign
Loan Activity Statutes. There can be no assurances, however, that Laws. We cannot predict what effect the enactment of future
states with these Loan Activity Statutes will not contend Foreign Laws, changes in interpretations of existing Foreign
successfully that these statutes apply to the RAL business and Laws, or the results of future regulator inquiries regarding the
that we will need to become licensed under the Loan Activity applicability of Foreign Laws may have on our segments, any
Statutes, otherwise comply with statutory requirements, or particular subsidiary, or our consolidated financial statements.
modify procedures so that the Loan Activity Statutes are Statutes and regulations relating to income tax return
inapplicable. preparers, electronic filing, franchising and other areas affecting
H&R BLOCK 2005 Form 10K
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