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Arkansas Opens Blockbuster Late Fee Probe

15 Dec, 2005 By: Erik Gruenwedel



The Arkansas attorney general's office is looking into allegations that select Blockbuster Inc. franchise stores in the state, as well as Alabama, Mississippi and Tennessee have begun charging late fees without informing customers.

“We started getting some complaints from customers that they were not properly informed this was going to happen,” said Matt DeCample, a spokesperson for Arkansas Attorney General Mike Beebe. “Late fees just began to appear on their accounts.”

Earlier this year, Blockbuster issued refunds to customers in 47 states regarding “no late fees” allegations. The action came after Blockbuster staged a big promotional campaign, announcing it would no longer charge penalties if movies are returned late, but implemented several fine-print caveats, including charging some customers a restocking fee.

DeCample said Blockbuster had been notified of the attorney general's action and whether consumers were properly informed how that was or was not promoted by the franchise stores. He said it was premature to discuss possible disciplinary measures.

“We're not to that point yet,” DeCample said. “We're just trying to talk and get some answers from [Blockbuster]. We're not looking at charges or anything.”

Nick Shepherd, president of Blockbuster North America, said approximately 160 franchise stores have decided to no longer offer the program.

The “no late fees” program has forced stores to increase supply levels and seek ways to motivate customers to return rentals in a timely manner, Shepherd said. “Some franchisees cannot invest sufficiently in product to support the program and are no longer offering it," he said.

Shepherd said customers can determine if a store is participating in the “no late fees” program through in-store signage and consulting in-store “no late fees” info centers that provide terms and conditions explaining the entire program.

The elimination of late fees cost Blockbuster 15 percent in rental revenue in the second quarter, according to a company filing. About 515 franchise stores in the United States participated in the “end of late fees” program as of the second quarter, according to filings.

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