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The Honolulu Advertiser
Posted on: Wednesday, June 6, 2001

Blockbuster OKs late-fee settlement

USA Today

If you rented a video from Blockbuster in the past eight years — and got dinged with a late fee — you may be due a free rental. Or more.

Some to receive free rentals
 •  If approved by the court, customers who were charged late fees will automatically receive certificates for free video rentals. Blockbuster customers who were charged the fees for overdue rentals but aren't part of the suit can register for the certificates by filling out a form on the company's Web site.
 •  The certificates would be redeemable Jan. 15 through May 15, 2002.
Blockbuster, the world's largest video rental chain, has agreed to a class-action lawsuit settlement potentially worth up to $460 million to some 40 million customers who paid fees for overdue video rentals.

The lawsuit alleged that Blockbuster's fees, similar to those charged by other chains, were excessive and inadequately disclosed.

Under the pending settlement, not expected to get court approval until December, customers who paid late fees would be eligible for certificates for free video rentals and coupons for $1 off nonfood items.

The freebies vary depending on late fees paid, but customers whose fees were $30 or less would receive rental coupons worth up to $9. The maximum a customer could get is coupons worth up to $18.

"This is a good deal for Blockbuster customers," says Kevin Buchanan, the Dallas-based attorney who filed the lawsuit. Blockbuster has agreed to pay attorneys fees of up to $9.25 million.

Officials at Blockbuster admit no fault.

"We don't think we've done anything wrong," says Ed Stead, general counsel at Blockbuster. "This will help us get more movies into the hands of our customers."

And Blockbuster is not changing its late fees, which produce about 16 percent of the Viacom unit's rental income. Return a video even a few minutes late, and you'll still be charged a late fee equal to a full rental charge.

"The system doesn't work if you don't get the movies back at an agreed-upon time," says Stead.

But the company agreed, as part of the settlement, to more clearly spell out the late fee and nonreturn fee policies on its rental receipts.

What the settlement ultimately costs Blockbuster depends, in part, on how many customers redeem coupons. In court documents, Blockbuster said the face value of the coupons would be about $460 million.

But experts expect actual redemption to be a fraction of that. The settlement does not apply to customers at the 2,000 Blockbuster stores outside the United States.