H&R Block Inc agreed to pay $9.8 million in restitution, penalties and costs, as well as modify $115 million of home loans to resolve 2008 charges by Massachusetts that the company's former Option One subprime lending unit discriminated against thousands of black and Hispanic borrowers. 

Option One, now known as Sand Canyon Corp, used "a business model that absolutely failed to gauge the ability of borrowers to repay the loans.  Those loans did not take into account anything but the fees that were to be generated."   -- Martha Coakley, Massachusetts Attorney General.  

Allegations Against H&R Block.   From 2004 to 2007, Option One allegedly made home loans that borrowers didn't qualify for, which posed excessive risk of default and foreclosure, and carried unjustified fees.  Ms. Coakley said this was the first case by a state attorney general to accuse a subprime lender of civil rights violations. 
 

Terms of Settlement.   In addition to the monetary fine, H&R Block will direct American Home Mortgage Servicing Inc to modify as many as 5,500 eligible Option One loans it services in Massachusetts.  There's also a $5 million contingency for modifications that cannot be made.

American Home Mortgage is owned by billionaire investor Wilbur Ross, who bought Option One's mortgage servicing business from H&R Block in 2008.  Option One had stopped offering mortgages the prior year after incurring about $1 billion of losses.   [Reuters, 8/9/11]