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March 29, 2005

Blockbuster Must Disclose Possible Charges with "No Late Fee" Program

Blockbuster settles with states over allegations that "No Late Free" program was misleading. Consumers may be eligible for refunds if they allege they were misled.

DES MOINES.   Attorney General Tom Miller said today that Blockbuster, Inc., has agreed to make changes in advertising of its "No Late Fee" program, and to make refunds to consumers who allege they were misled by the program, which started January 1st.

The agreement resolves allegations by state attorneys general that Blockbuster's heavily-publicized "No Late Fee" program failed to clearly disclose that consumers who kept a video or game more than seven days after its due-date would be charged the selling price of the item. Consumers also would be charged a "restocking fee" of $1.25 if they sought to reverse a sale and return a video or game after the rental had been converted to a sale.

"Blockbuster will continue with these terms and possible charges," Miller said, "but it has formally agreed with the states that it will clearly and conspicuously inform consumers about the important details concerning potential charges."

Blockbuster customers who believe they are entitled to a refund because they did not understand the program may get a refund form at Blockbuster stores in Iowa. Blockbuster has 25 company-owned stores in Iowa and two franchise stores. The Iowa franchise stores also are participating in the agreement between Blockbuster and 47 states and the District of Columbia.

Details on how to seek refunds:

Blockbuster agreed to provide a full refund or credit to any customer of a corporate store (or a franchise store that participated in the "No Late Fee" program) equal to the selling price of any rental items converted to a sale under the "No Late Fee" program, upon return of the items in good condition. If the customer already returned the item but paid a "restocking fee," the customer can obtain a refund of the restocking fee.

Requests for restitution must be made in writing and must allege the consumer's failure to understand the "No Late Fee" program details. Restitution is to cover all items rented which were converted to a sale before the customer learned a sale would occur. Consumers will need to bring a credit card to a store to put credit back on a card that was debited in converting a rental to a sale.

Click here for a copy of the refund form.

Refund forms will also be available at Blockbuster stores. Blockbuster has asked its store personnel to resolve requests on the spot, if possible. Customers also may send refund requests to: Blockbuster, 1201 Elm Street, Suite 2100, Dallas, Texas 75270 (attention Steve Krumholz.)

Refund requests must be submitted by April 28, 2005 (or, if after that, within seven days of a consumer first discovering an expenditure was required in addition to the rental sum.)

Details of the Assurance of Voluntary Compliance:

The formal agreement between Blockbuster and the 47 states (plus D.C.) is called an "Assurance of Voluntary Compliance," or AVC. Click here for the full AVC.

The AVC is not an admission by Blockbuster of a violation of law, and Blockbuster denies the States' allegations that the "No Late Fee" program was misleading in much of its advertising.

Blockbuster agreed in the AVC that its advertising will not represent that there are no late fees, unless there also is clear and conspicuous disclosure of any charges such as rentals being converted to a sale, or restocking fees. "Advertising" includes TV and radio ads, print ads, ads on billboards or buses, Internet ads, and large signs inside and outside stores.

All stores must clearly and conspicuously display Blockbuster's policy for charges if rental items are not returned. Blockbuster has 4500 corporate stores in the U.S.

For the next six months Blockbuster has additional obligations such as posting its policies on store doors, at the end of aisles, on brochures, and on its web site -

Blockbuster also will pay the states a total of $630,000 ($12,500 to Iowa) for attorneys fees, costs of investigation, and consumer protection and litigation.

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