Blockbuster Sued Over Late-Fee Claims

New Jersey wants Blockbuster Inc. to hit the pause button on its “No More Late Fees” marketing campaign.

The state sued the nation’s biggest video rental chain Friday, alleging that the late-fee claim was fraudulent because customers could potentially get stuck buying movies they failed to return on time.

Additionally, California officials confirmed that they were part of a separate probe into the matter by 37 states. The task force was formed last month amid concerns that Blockbuster may be violating consumer protection laws.

“It comes down to truth in advertising,” said Tom Dressler, spokesman for California Atty. Gen. Bill Lockyer.

The New Jersey lawsuit alleges that consumers aren’t being told that overdue rentals are automatically charged at the full sales price if not returned by the eighth day. Even when customers return a movie within 30 days and are not docked the full amount, they are still hit with a $1.25-per-DVD restocking fee.

The suit also contends that Dallas-based Blockbuster failed to tell consumers that some of its stores don’t participate in the program. New Jersey is seeking up to $10,000 for each violation.

“We believe the advertisement campaign is deceptive and misleading,” said Atty. Gen. Peter C. Harvey. “It asserts there are no more late fees, which leads the public to believe it will not take any fee of any type. And that is simply not accurate.”

Blockbuster denied that its late-fee campaign, which started Jan. 1, was deceptive.

“The fact is there are no longer late fees at Blockbuster, and we are surprised that the New Jersey state attorney general never directly contacted us about this,” the company said.

Blockbuster went on to describe its program as “terrific,” adding that “we’ve received tremendous feedback from both our customers and employees.”

The company initiated the policy to address what has long been one of the biggest customer complaints. Rival Netflix Inc., an online DVD rental service based in Los Gatos, Calif., has exploited that dissatisfaction to grab market share.

Blockbuster shares rose 4 cents to $9.12 on the New York Stock Exchange.