Blockbuster late fee policy unclear

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Economics classes teach that there is no such thing as a free lunch, because the cost is ultimately paid by someone somewhere.

In other words, consumers should be weary of such supposedly “free” deals. Too bad Blockbuster video patrons across the nation did not heed such warnings before falling for the company’s “no more late fees” promotion.

Launched in January, Blockbuster’s campaign promises, in advertising seen almost everywhere, “an end to late fees.” But the rental giant now faces legal challenges as some legal experts claim the promotion is nothing less than false advertising. New Jersey Attorney General Peter Harvey recently filed a lawsuit with Blockbuster Inc., saying that the advertisements are “fraudulent and deceptive” and violate New Jersey’s state consumer fraud laws.

So, how exactly are these ads deceptive? Are late fees really gone at Blockbuster like the commercials say?

When Blockbuster customers rent a movie or a video game, they are given a due date. If customers fail to return the item within 7 days after the due date, their credit card is charged the full price of the movie or game, as what was once a “rental” becomes what Blockbuster now considers a “purchase.” But the ads fail to mention that you will be buying the movie or game after 7 days. The charges will be reversed if the item is returned within 30 days, but the customer’s account will still incur a restocking fee.

When customers are charged money for returning a movie or game late, whether that fee is the purchase price or a fee to restock the item, or “late” is 8 days or over a month, it is hardly the end of late fees, as the Blockbuster ads deceptively claim.

It is these details, among others, that caused Harvey to investigate Blockbuster and ultimately file a lawsuit on behalf of New Jersey. And he is not alone in thinking Blockbuster has crossed ethical lines with its advertising, as attorneys general in 37 other states, including California, are also looking into the matter.

The office of Bill Lockyer, California’s attorney general, has called the Blockbuster promotion controversy a “truth in advertising” issue, expressing concern that the ads also do not make it clear that individual Blockbuster franchisees can choose not to participate in the promotion. Thus, customers can visit a Blockbuster location that still charges late fees, thinking such fees are a thing of the past from all the TV commercials they have seen, and be shocked when they receive their bill. It has happened already.

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This “end of late fees” promotion by Blockbuster seems to be a way for them to combat competition with the rising popularity of Netflix, an online movie rental business that charges customers a monthly fee and allows them to rent three movies at a time and keep them as long as they want, getting a new movie anytime they turn in one. But Blockbuster’s new promotion seems like it was not well thought out. Patrons will likely keep movies and games longer, which will start to leave the shelves barren for other customers.

So, with Blockbuster’s decreasing selection and its murky truths, it seems there is more reason to venture to the mom-and-pop video stores for movie rental needs.

But if Blockbuster patrons know all the details behind the promotion and are still happy with it, then the deal does not need to be changed.

The problem is that some customers are being misled. Before suing, New Jersey investigated Blockbuster stores, finding that many customers were given false information by Blockbuster employees about the company’s no late fees program. And Susan Tompor, columnist for the Detroit Free-Press, did her own brief investigation of Blockbuster’s program, finding that the price consumers will pay for purchasing the movie, for failing to return it within 7 days of it being due, varies and is unclear.

Sure, customers should read the fine print of a deal before agreeing to it. But in this case, the fine print doesn’t even tell the whole truth, as charges for purchasing remain vague. And the bold claims made in ads — the end of late fees — mislead an unknowing public.

Blockbuster should either change its promotion or state clearly what the promotion is all about, because not everyone is aware that free lunches come at a price.

James Zvonec is a graduate student studying mass communication.