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Archive for Wednesday, June 6, 2001

Blockbuster offers to settle late-fee cases

Video-, game-rental powerhouse seeks to issue discounts, coupons to late-paying customers since 1992

June 6, 2001

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— Blockbuster Inc. is proposing to issue millions of coupons for free video rentals to settle 23 class-action lawsuits accusing the company of charging exorbitant late fees.

In court documents, the world's largest video rental chain said the face value of the coupons would be about $460 million.

"We don't think we've done anything wrong," said Ed Stead, Blockbuster general counsel. "Everything we've done has been in our customers' interest, and we're not going to change our practices."

Under the plan given preliminary approval by a Texas judge, customers who were charged late or nonreturn fees on videos between 1992 and April 1 could get coupons for rentals and other discounts.

Stead said the settlement would cost the company less than $45 million because many coupons wouldn't be used.

A Dec. 10 hearing is scheduled on the settlement offer.

Blockbuster used to add a charge for every day a rental was late. In February 2000, it began treating late tapes as if the customer had rented them for another 2-day or 5-day period. Both practices were attacked in lawsuits.

"When you rent a car for $300 a week and bring it in three hours late, they don't charge you another $300; they prorate it and charge you for the extra three hours," said Brian Lysaght, a Santa Monica, Calif., lawyer involved in one lawsuit.

Last year, Blockbuster earned 19 percent of its rental income from late fees $795.8 million out of $4.2 billion.

In September, Blockbuster settled a similar class-action lawsuit in Michigan by issuing coupons.

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