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Blockbuster Settles 'No Late Fees' Case

By Caroline E. Mayer
Washington Post Staff Writer
Wednesday, March 30, 2005; Page E01

Blockbuster Inc. said yesterday that it would change how it promotes its "No Late Fees" policy to make sure customers know they may incur some charges if they keep videotapes, DVDs or games seven days beyond their due dates.

In a settlement with 47 states and the District of Columbia, the nation's largest movie-rental chain also said it would offer refunds to aggrieved customers who were charged fees under the policy that went into effect on Jan. 1.

Blockbuster promoted a "No Late Fees" policy but some states found it to be misleading. (Ron Heflin -- AP)

Without admitting wrongdoing, the company also agreed to pay the states a total of $630,000 to cover investigative costs and lawyer fees.

When Blockbuster introduced the policy, Chairman John F. Antioco said it was the "biggest and most important customer benefit we've ever offered" because it would eliminate the biggest source of customer dissatisfaction.

However, the program drew the immediate attention of state attorneys general even though few complaints were filed. "As soon as we saw the ads, we knew that there was something there that was too good to be true," said Jan Margosian, a spokeswoman for the Oregon attorney general's office. "We didn't even need complaints."

The attorneys general alleged that the program was misleading because Blockbuster did not adequately disclose that if customers kept rented videos or games for more than seven days after their due dates, they would be charged the sales price for the overdue items. That could result in a charge of $8 to $20 to a customer's credit card. The charge could be reversed if the item was returned within 30 days, but then a $1.25 restocking fee would be charged.

In settling with the states, Blockbuster agreed to clarify its program through more in-store signs, more details on receipts and on its Web sites. Customers who were charged restocking fees or the sales price of items will be given refunds as long as the items were returned in good condition. Blockbuster said affected customers should fill out complaint forms at their local stores.

Karen Raskopf, a Blockbuster spokeswoman, said the company credits the new fee policy for a significant increase in rental transactions this year. Customers who did not return items by due dates kept them an average two days longer, and only 4 percent were charged the sales price of items, she said.

Vermont, New Hampshire and New Jersey did not participate in the settlement. New Jersey sued Blockbuster last month, saying its new policy was deceptive and fraudulent. That suit is pending.

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