Blockbuster to Settle Lawsuits Over Late Fees

Blockbuster Inc. on Tuesday offered to issue $460 million worth of coupons for free video rentals to settle nearly two-dozen class-action lawsuits accusing the company of charging exorbitant late fees.

Customers who paid late fees at Blockbuster stores from Jan. 1, 1992, to April 1, 2001, will be eligible to receive store discounts--valued at $9 to $18--to use on video, DVD or video-game rentals or purchases.

Dallas-based Blockbuster, the nation’s largest video rental chain, did not admit any wrongdoing or agree to alter its practices.

“This settlement allows us to save time, energy and money,” said company spokeswoman Karen Raskopf. “The allegations are baseless, and we want to move on. We stand by our current policies, and business will continue as usual.”

The settlement, given preliminary approval by a Texas judge, is not expected to get the final go-ahead until early December and won’t take effect until January.

The class-action lawsuits alleged that Blockbuster overcharged customers for late videos and unfairly profited as a result. In particular, they pointed to a change in the chain’s late-fee policy.

In February 2000, Blockbuster revised its policy on late fees. Instead of requiring videos to be returned by midnight on the due date, the chain allowed customers to keep rentals until noon the next day. The new policy confused many customers. For example, a video rented Monday would be due at noon Wednesday. Customers who returned the video after noon were charged for two extra days.

“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 lawyer involved in one lawsuit.

The company, which operates 7,700 stores, earned about 19%, or $796 million, of its $4.2 billion in rental income from late fees.

As part of the settlement, Blockbuster--a subsidiary of Viacom Inc.--will pay as much as $9.25 million in plaintiffs’ attorney fees and expenses. Raskopf said the amount would not affect earnings.

The settlement ultimately may cost Blockbuster less than $45 million because many of the coupons won’t be used, said Ed Stead, the company’s general counsel.

The coupons will be issued and redeemed from Jan. 15 to May 15. The amount will be determined by how much each customer paid in late fees. For example, a customer who paid $30 to $60 in late fees will receive about $13 worth of coupons--including two free Blockbuster Favorite rentals, five $1 certificates to be used on rentals or nonfood purchases, and one certificate for a free rental.

Customers who paid a late fee from April 1, 1999, to April 1 of this year will receive the coupons only by visiting a Blockbuster store. Customers who paid a late fee before April 1, 1999, must fill out a claim form by Dec. 15. Claim forms can be redeemed at a Blockbuster store or on the chain’s Web site at https://www.blockbuster.com.

On the New York Stock Exchange, Blockbuster shares fell 2 cents to close at $21.79, and Viacom fell 10 cents to $57.05.

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The Associated Press was used in compiling this report.