Blockbuster Gets Sued for ‘No More Late Fees’

I caught a tiny bit of flak from fringes of the gnomeosphere back in December when I wrote that Blockbuster takes me for an idiot. Well, gee … I guess I’m not alone. The Attorney General of the great State of New Jersey is going after Blockbuster for their “fraudulent and deceptive” advertising …

Rather than weigh in on the issue heavily(again), I’ll just share the AG’s press release:

NEWARK – Attorney General Peter C. Harvey filed suit today against Blockbuster, Inc., alleging that the movie and game rental chain violated New Jersey’s Consumer Fraud Act and Merchandise Advertising Regulations by failing to disclose key terms of its new “No More Late Fees” policy.

The Attorney General and Division of Consumer Affairs filed a complaint in Superior Court in Mercer County alleging that Blockbuster failed to disclose in its advertisements (1) that overdue rentals are automatically converted to a sale on the eighth day after the due date; and (2) that if customers return the overdue items within 30 days after the “sale” date, Blockbuster will reverse the sale charge, but charge a restocking fee. The complaint also alleges that Blockbuster fails to prominently disclose that some of its stores do not participate in the “No More Late Fees” policy and continue to charge late fees.

“Blockbuster boldly announced its ‘No More Late Fees’ policy, but has not told customers about the big fees they are charged if they keep videos or games for more than a week after they are due,” Attorney General Harvey said. “Blockbuster’s ads are fraudulent and deceptive. They lead people to believe that an overdue rental will cost them absolutely nothing when, in fact, customers are being ambushed with (a) late fees in some stores, (b) so-called ‘restock fees,’ and (c) credit card or membership account charges equal to the purchase price of the video.”

The State is seeking restitution for Blockbuster customers whose overdue rentals were converted to a sale, were charged restocking fees and/or charged late fees by a non-participating store. The State also seeks civil penalties of up to $10,000 for each violation of the Consumer Fraud Act.

Blockbuster, which operates approximately 170 stores in New Jersey, implemented its “No More Late Fees” policy on January 1.

The State’s complaint (33k pdf) alleges, in part, that Blockbuster engaged in fraudulent and/or unconscionable business practices by:

• Failing to clearly and conspicuously disclose the terms of the “No More Late Fees” policy in its advertisements, in-store signage and through store personnel;
• Failing to clearly and conspicuously disclose to consumers that rentals would automatically be converted to a sale and charged on the customer’s credit card or membership account after a certain period of time, which varied from store to store;
• Failing to clearly and conspicuously disclose to consumers that although the sale charge would be reversed if an overdue video were returned within 30 days after the “sale” date, there would be a $1.25 restocking fee for such overdue items at corporate-owned stores and the restocking fee varied among franchise stores;
• Failing to clearly and conspicuously disclose that some franchise stores were not participating in the “No More Late Fees” policy; and
• Prominently displaying in-store signage that simply refers the consumer to a store associate for details, then providing consumers, through store personnel, with incomplete, inaccurate and/or inconsistent information about the “No More Late Fees” policy.

“We expect businesses to completely and clearly tell their customers about all relevant terms and conditions regarding their policies,” Acting Consumer Affairs Director Jeffrey Burstein said. “We will not tolerate the withholding of such important information from consumers, especially when it results in unexpected out-of-pocket expenses.”

Deputy Attorney General Cathleen O’Donnell is representing the State. Investigator Taryn Rucinski is investigating this matter.