Attorney General Long Announces Settlement with Blockbuster over Advertising for “No Late Fee” Program

PIERRE, S.D. – Attorney General Larry Long today announced that he and the Attorneys General of 46 other states plus the District of Columbia reached agreement with Blockbuster Inc., to settle allegations that it misled consumers in the advertising of its “No Late Fee” program.   

The Attorneys General alleged that the advertising campaign was misleading because it failed to clearly and conspicuously disclose that if a consumer who rented a video or game from Blockbuster kept the item out more than 7 days after its return due date, the consumer would be charged for the selling price of the video, and that after that, if the consumer wanted to return the video the consumer would be charged a “restocking” fee of $1.25, or higher at some franchise stores.  The Attorneys General also alleged there was insufficient disclosure of the fact the program was offered only at participating stores and that some customers of nonparticipating franchise stores thought they would not have to pay late fees.  

Blockbuster began advertising the “The End of Late Fees” and “No Late Fees” on December 15, 2004, with the program starting on January 1, 2005.  The program is available at all company-owned stores and those franchise stores that chose to participate. In South Dakota, six of the nine franchise stores are participating in the program.    

 “This settlement reminds companies that they have to be careful with the phrasing of advertisements,” said Long. “Full disclosure of the terms and conditions attached to each offer is very important.”

Under the terms of the settlement, Blockbuster has agreed that in future advertising for the “No Late Fee” program it will:

• Not represent directly or by implication in any of its advertising that there are no late fees or only limited late fees unless such representation is accompanied by and appears proximately to a clear and conspicuous disclosure of the existence of any charge (including, without limitation, any rental fee, restocking fee, or charge associated with a rental transaction that has been converted to a sale). 
• Advise of any limitation on the stores participating in the offer. 

Advertising is defined to include (1) any e-newsletters, email and Internet advertisements, (2) any direct mail pieces, (3) any large out-of-home advertising such as on billboards or buses, (4) any television or radio advertising, (5) any print advertising, (6) any large signage on the outside of stores, and (7) any large signage on the inside of stores such as banners, floor decals and signs, all of which must clearly and conspicuously display its policy for return of rental product and applicable charges if product is not returned. Blockbuster also agreed that all stores will clearly and conspicuously display Blockbuster’s policy for return of rental product and applicable charges if product is not returned.

Blockbuster also agreed to provide a full refund or credit to any customer of a corporate store or a franchise store that participated in the “No Late Fee” program equal to the selling price of any rental items converted to a sale under the “No Late Fee” program which rental items were not returned within thirty days from the sale date, upon the return in good condition of the items rented.  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.   A request for restitution must have been or be made in writing and allege a failure to understand the “No Late Fee” program.  

Blockbuster customers who believe they are entitled to a refund because they did not understand the program may get a refund form at a corporate owned or participating franchise store. Blockbuster has asked its personnel and suggested to franchise stores that requests be resolved on the spot if possible.  Customers may also send their request to Blockbuster, 1201 Elm Street, Suite 2100, Dallas, TX 75270, Attention: Steve Krumholz, by April 28, 2005, or if after that, within 7 days of first discovering an expenditure in addition to the initial rental sum is or was required.

Customers who rented from a non-participating franchise store which did not have signs saying it was not participating in the "No Late Fee" program, who allege a lack of understanding and were charged a late fee beyond the initial rental fee may ask for a coupon request form at the store.  Customers may send the form to Blockbuster at the above address to receive rental coupons equal to the number of rented movies on which such charges were assessed. Blockbuster has requested these stores resolve complaints on the spot if possible. Eligible customers are those who rented product after December 31, 2004 and prior to March 29, 2005. Refund coupons only apply to late fees on items in the initial rental transaction after December 31, 2004. 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 concludes September 29, 2005.  

As part of the settlement, which Blockbuster entered into without any admission of wrongdoing, Blockbuster will pay the states a total of $630,000 for attorney’s fees, costs of investigation and consumer protection. The South Dakota Consumer Protection Division’s share is $12,500.

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