NJ Tax Prep Firm Ordered to Pay $1.64 Million to Clients

Malqui Tax didn't disclose true cost of refund anticipation loans, court finds

April 14, 2009

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A New Jersey tax preparation firm has been ordered to pay $1.86 million in penalties and to repay $1.64 million to consumers who were deceptively sold high-cost refund anticipation loans (RALs), Attorney General Anne Milgram announced.

Superior Court Judge Thomas P. Olivieri, Presiding Judge of the Chancery Division, General Equity, of the Superior Court for Hudson County ruled that defendants Malqui Financial Group, Inc. and Fast Tax Express Corp., both of which do business as “Malqui Tax,” and owner Ceasar B. Malqui were liable for hundreds of Consumer Fraud Act violations arising from their unconscionable, deceptive sales of RALs to New Jersey’s working poor.

“We will not permit tax preparers to victimize consumers with deceptive claims of ‘instant tax refunds’ when what they are really getting are costly loans paid from their tax refunds,” Milgram said. “I am pleased that the Court has held those who perpetrated this scam accountable for their illegal actions.”

Ceasar Malqui, who resides in Paterson, is permanently enjoined from owning or managing any business that sells RALs and he cannot advertise or sell RALs himself. The Court ordered Malqui’s companies to adopt a series of best practices designed to ensure that consumers are expressly told about RALs' costs, conditions and all no-cost refund options offered by the IRS. The Court also voided Malqui’s fraudulent sale of assets from Malqui Financial Group, Inc. to Fast Tax Express Corp., which occurred after the state filed its lawsuit.

“The sale and transfer of assets between companies that he controlled was a failed attempt by Ceasar Malqui to avoid justice,” said David Szuchman, New Jersey Consumer Affairs Director. “This attempted deception failed, just as his deceptions in marketing RALs to consumers were uncovered and found to be illegal.”

The $1.64 million in consumer restitution is based on a $134 document preparation fee and $15 service bureau fee that 10,980 customers each paid to Malqui in Calendar Years 2006 and 2007. These charges were not disclosed to consumers, despite Malqui’s advertisements which touted “no hidden fees.”

An RAL is a high-cost loan that is secured by the taxpayer’s anticipated tax refund. RALs can carry triple digit interest rates, hidden fees and may expose consumers to unpaid debt, if their tax refund is not as much as expected.

A study by the Consumer Federation of America and National Consumer Law Center found that 8.67 million U.S. consumers paid about $900 million in loan charges and fees for RALs in 2007.

The state sued the defendants in March 2007, alleging that Malqui and his companies violated the state’s Consumer Fraud Act by using unconscionable commercial practices in connection with the sale and advertisement of its services, making misrepresentations in the sale and advertisement of its services, and by knowingly concealing, suppressing or omitting material facts.

Malqui’s specific violations included the following:

• Advertising and selling RALs and similar financial products as income tax refunds;
• Deceptively advertising RALs as loans in English, while describing them as refunds in Spanish;
• Marketing and brokering RALs and similar financial products in a manner likely to confuse taxpayers into believing that such products are a way to quickly receive tax refunds from the IRS;
• Advertising RALs with no hidden fees then charging undisclosed fees for these products;
• Deceptively touting the speed with which Malqui could obtain refunds for consumers while actually selling RALs; and
• Misrepresenting to consumers that they could get a loan in the amount of their anticipated tax refund, when the proceeds of RALs are actually far less after fees and finance charges.

The Court found that Malqui and his companies targeted consumers eligible for the Earned Income Tax Credit, the federal government’s largest anti-poverty program. Malqui at one time operated 24 locations, though some have closed since the state filed its lawsuit. Defendant Malqui Financial Group Inc. filed for bankruptcy protection last year.

Attorney General Milgram and Director Szuchman in February announced that 38 tax preparation firms statewide had been cited for false advertising in offering “same day” tax refunds that in reality were RALs.

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