Attorney General Suthers Announces Settlement with Blockbuster over "No Late Fee" ads

DENVER – Colorado Attorney General John W. Suthers today announced that he and the Attorneys General of 46 other states, and the District of Columbia, reached agreement with Blockbuster Inc., to settle allegations that it deceived consumers in the advertising of its “No Late Fee” program beginning in late 2004. In Colorado, the program was in place in 121 company-owned stores and in 4 franchise stores. Blockbuster has agreed to change its advertising and will make refunds or credits to consumers who file a complaint.

 “Blockbuster’s ‘No Late Fee’ promotion misled some consumers,” said Attorney General John Suthers. “This settlement involves a termination of the misleading advertising and an effort by the company to rectify damage caused to those who were misled.”

Under the “No Late Fee” program, if a consumer rented a video or game from Blockbuster and kept the item more than 7 days after its return due date, the rental would automatically convert to a sale and the consumer would be charged the sale price. If the consumer then wanted to return the video, they would be charged a “restocking” fee of $1.25 or higher at some franchise stores.

The settlement requires Blockbuster to discontinue advertising for the “No Late Fee” program that states or implies that there are no late fees or only limited late fees, unless such advertising also discloses all other charges or fees that may be assessed. Blockbuster has also agreed to advise consumers of any limitation on the stores participating in the offer.

Blockbuster will immediately remove from its stores the current external window signage and the current internal signage advertising its “No Late Fee” program. All Blockbuster stores must clearly and conspicuously display Blockbuster’s policy for return of rentals, including any for late returns. Blockbuster must also provide brochures containing the terms and conditions of the offer in every store, which are prominently available for customers to read at the store and/or take home. Blockbuster will request and recommend that participating franchise stores do the same. Finally, Blockbuster must prominently display the terms and conditions of the program on its website (www.blockbuster.com).

Specific information on consumer refunds and the complaint procedure are attached, and are also available on the Attorney General’s website (www.ago.state.co.us).

CONSUMER REFUNDS, CREDITS OR COUPONS

Sale Price or Restocking Fee: Blockbuster has agreed to provide a full refund or credit to any customer of a corporate or a franchise store that participated in the “No Late Fee” program. The refund will be equal to the selling price of any rental items converted to a sale under the “No Late Fee” program if it is returned in good condition. The restitution shall be on a one-time per customer basis but will cover all items rented which were converted to a sale before the customer learned on the first rental transaction that a sale would occur.

If the customer already returned the item but paid a “restocking” fee, the customer can obtain a refund of the “restocking” fee.

Late Fees: Customers who were charged a late fee by a franchise store that did not have signage up indicating it was not participating in the “No Late Fee” program will receive rental coupons equal to the number of rented movies on which late fees were assessed. Eligible customers are only those who rented product after December 31, 2004 and prior to March 29, 2005. Restitution only applies to late fees on items in the first rental transaction after December 31, 2004.

REFUND PROCEDURE

Consumers may obtain a refund form and settle their complaint at company-owned stores and participating franchise stores. Blockbuster has encouraged its personnel to resolve refund requests at the store if possible.

Refund forms may also be obtained online at the Colorado Attorney General’s website at www.ago.state.co.us and a complaint filed directly with Blockbuster at:

Blockbuster Inc.
1201 Elm Street, Suite 2100,
Dallas, TX 75270
Attention: Mr. Steve Krumholz, Sr. Vice President

Complaints must be filed by April 28, 2005 or, if after that date, within 7 days of first discovering that a “sale” or “restocking” fee was required. All requests for restitution must be made in writing and must allege a failure to understand the “No Late Fee” program.

Customers who paid late fees may ask for a coupon request form at the store and send the form to Blockbuster at the above address. However, Blockbuster has requested these stores resolve complaints on the spot if possible. Requests must be made by April 28, 2005, or if after that, within 7 days of first discovering that late fees were being charged.

The restitution period ends September 29, 2005.

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