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States Probe Blockbuster No Late Fees Policy

11 Feb, 2005 By: Holly J. Wagner

Attorneys general in at least 35 states are looking into Blockbuster Inc.'s new no-late fees-policy, focusing on potentially deceptive practices because of the “restocking” fees and disparities between national advertising and franchisee practices.

Franchisees had the option of adopting the no-late-fees program, which gives consumers a seven-day grace period after a rental's due date, but they did not have to adhere to it.

Under the no-late-fees program, if the customer keeps the title longer than seven days, their account is charged the sellthrough price, which may be a new or previously viewed title price, depending on what is available at the store where it was rented. If the customer returns the title within 30 days, the charge is credited to the customer's account as store credit, less a $1.25-per-title “restocking” fee.

“Our customers understand the program, and we are happy to explain it to anyone else who is interested,” Blockbuster said in a statement.

Blockbuster disclosed in a filing with the Securities and Exchange Commission that “in January 2005, Blockbuster received inquiries from several state attorneys general … to determine the compliance by Blockbuster with applicable laws in connection with its ‘end of late fees' promotion. Blockbuster believes that such a program was conducted in compliance with applicable laws.”

A spokesperson for the Florida attorney general's office confirmed that Florida attorney general Charlie Crisp is among several who are inquiring into the program and promotions for it.

“We are one of 35 or 36 attorneys general looking into this,” the spokesperson said. “So far, they [Blockbuster] are cooperating.”

The inquiries are focused on two potentially deceptive practices: advertising the end of late fees while reportedly about half of the chain's U.S. franchisees decided not to participate in the program, and the charging of the restocking fee for returned items, the spokesperson said.

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