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Blockbuster sued over 'End of Late Fees' promotion

New Jersey, which filed the lawsuit, is among 30 states where agencies are investigating complaints.

By MARK ALBRIGHT
Published February 19, 2005

The state of New Jersey has filed a deceptive trade practices lawsuit over Blockbuster Video's heavily promoted claims of "The End of Late Fees."

New Jersey is among 30 states, including Florida, where consumer protection agencies are investigating complaints that Blockbuster's advertising glosses over the fine print of its new pricing policy.

Some consumer agencies want to clarify why the chain, which has more than 9,000 stores in the United States, is advertising the claim while as many as half of its 1,100 independently owned, franchised stores have opted to keep charging late fees under the old rules.

The Dallas video chain has been trumpeting in ads how it eliminated late fees, which have been customers' biggest annoyance with video stores.

But key points of the fine print indicate the chain changed its pricing formula from a rental to more of a rent-to-buy transaction.

Customers who don't return a rental by the due date get an extra week free. On the eighth day after that, the store assumes customers who didn't bring a video back intend to buy it. Their credit card is then billed the purchase price, less whatever they paid in rental. If the customer then brings back the video, they need to pay only a $1.25 restocking fee.

"We were surprised at New Jersey filing suit," Blockbuster spokesman Randy Hargrove said. "They never contacted us for an explanation."

The company said it has been clear in explaining the rules and that although it has been cooperating with the consumer agency investigations, most appeared satisfied at the explanation.

Blockbuster employees were trained to explain the new rules. And rental customers are supposed to get a phone call and two postcard explanations mailed to them during the first week the video has not been returned. Stores are supposed to call a third time the day Blockbuster puts the purchase on their credit card. The broadcast ads said the offer is good at "participating stores" and to check "your store for details."

In New Jersey, however, state Attorney General Peter Harvey said the ads were deceptive because they did not make enough of the terms obvious. After investigators visited dozens of stores, his office said some clerks gave erroneous information about the terms.

Blockbuster shares rose 4 cents to close at $9.12 in trading Friday on the New York Stock Exchange.

Mark Albright can be reached at albright@sptimes.com or 727 893-8252.

[Last modified February 19, 2005, 00:56:09]