Blockbuster offers
free rentals to settle
suit against late fees

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Associated Press

DALLAS >> 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 non-return 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 won't be used.

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

Blockbuster has already begun running newspaper advertisements to promote its offer and posted the terms on its Web site -- http://www.blockbuster.com. Claim forms and details on the offer are available on the site by clicking "EVF Settlement Information."

In Hawaii, inquiries are being referred to 1-800-224-2703, which offers a recorded message spelling out similar details of claims and awards.

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 California lawyer.

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

In September, Blockbuster settled a similar suit in Michigan by issuing coupons for free video rentals. Stead said the company has won similar cases in Alabama and California.