Option One may be gone from H&R Block's books, but the ghost of the subprime lender continues to haunt the tax preparer's present operations. Massachusetts Attorney General Martha Coakley said Tuesday that she had sued Option One Mortgage Corp. as well as H&R Block, Inc. (HRB) over alleged deceptive and discriminatory lending practices. In a complaint filed Tuesday in Suffolk County, Coakley alleged that Option One and H&R Block engaged in "unfair and deceptive conduct on a broad scale by selling extremely risky loan products that the companies knew or should have known were destined to fail to Massachusetts consumers." The complaint also alleges that the companies discriminated against black and Latino borrowers in Massachusetts by charging them higher points and fees to close their loans, when compared to similarly-situated white borrowers. "Unfair and deceptive lending practices such as those alleged in this complaint have contributed substantially to the escalating foreclosure crisis in Massachusetts, and across the nation," said Coakley. "Marketing loan products that were designed to fail not only harms individuals and families who are struggling to afford their homes, but also has a negative impact on neighboring homeowners and the community at large." In early May, H&R Block completed a $1.3 billion sale of the Option One servicing franchise to an affiliate of WL Ross & Co. LLC, the company run by billionaire investor Wilbur Ross. Ross also purchased the servicing platform of now-bankrupt American Home Mortgage late last year, creating American Home Mortgage Servicing, Inc. The complaint also names American Home Mortgage Servicing as a defendant. Discriminatory charges The discriminatory charges represent a new tack, legal sources told Housing Wire; Coakley's office argues in the complaint that the seemingly simple act of partnering with minority real estate brokers and then targeting black and Latino borrowers with subprime loan products is actionable. "Option One and H&R Block discriminated against black and Latino borrowers by charging them higher points and fees at closing, and by targeting them with special marketing campaigns that promoted predatory loan products," Coakley's office said in a press statement. "For example, Option One and H&R Block provided information to their employees about how the limited choices available to these borrowers made them good candidates for subprime loan products." It's a new angle on so-called steering claims, said one legal source that spoke with Housing Wire. "Coakley's office is attempting to pull the string to say that H&R Block's corporate policies explicitly encouraged steering, rather than the individual conduct of brokers or agents themselves." The complaint is also among the first to note the once-widespread industry practice of hiring minority brokers and agents within a local community to help push subprime loans; at the time, the practice was seen as a way for lenders to tout their community involvement, but Coakley's office painted the practice as sinister and evidence of discriminatory intent. How the court chooses to interpret the practice may be critical to the case going forward, sources told Housing Wire. Coakley most recently targeted Fremont Investment & Loan over its subprime loans in the state, forcing a moratorium on foreclosures and restricting the company's ability to sell servicing rights on loans held by Massachusetts borrowers. Option One made more than 30,000 loans in Massachusetts between 2004 and 2007. Over 5,700 of these loans were made to black and Latino borrowers. Disclosure: The author held no positions in HRB when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.