LITTLE ROCK, Ark. – Blockbuster Inc. (BBI) stores in several states are quietly resuming late fees for customers who keep movies too long, rejecting the video-rental chain's national advertising of "No Late Fees!" because they can no longer keep popular movies on their shelves.
Many Arkansas stores resumed the late fees Nov. 21 and charges will apply again soon at various stores in Alabama, Mississippi and Tennessee. The Arkansas attorney general's office has heard complaints that the fees restarted without any notice.
Blockbuster last winter said it would drop late fees, but its fine print said the company would charge consumers if they kept the movies too long, then charge a $1.25 restocking fee if the movies were returned. In March, the Dallas-based company settled complaints heard in 47 states and authorized refunds for offended customers.
"At this point we are contacting the other states who we worked with before when we had the settlement with Blockbuster," said Matt DeCample, a spokesman for Arkansas Attorney General Mike Beebe. "The first questions you'd ask in a situation like this is, 'What does this mean under the settlement we already have?' and 'Was this something that was publicized on their (Blockbuster's) part?'"
Randy Hargrove, a spokesman for Dallas-based Blockbuster Inc., said the decision to cancel the "no late fees" policy is made by independent franchises. About 4,600 company-owned Blockbuster locations will continue the program, he said.
Tom Barzizza, vice president of Flicks Management Inc., which owns 30 Blockbuster franchises in the mid-South, said it stapled notices to receipts for 30 days prior to the late fees' return. Some customers said they did not receive the notice.
Barzizza said it was important to reimpose the fees.
"It's a mechanism by which we can get customers to bring the movies back," he said. "Our business is all about availabililty. If somebody keeps a new release that's in high demand out for two weeks, that means it's not there for someone else to rent.
"With the lack of any kind of late-fee structure the movies weren't coming back. Customers would come in and there wouldn't be any movies for them to rent," he said.
The late fee is equal to the full rental rate divided by the number of days in the rental period. For example, for a $4 movie rented for five days, the late fee would be 80 cents per day.
"This way customers pay for what they use and it helps customers return the movies in a timely manner," Barzizza said. "It's a completely fair deal. Customers understand that if they choose to keep the movie for a day, we're going to charge them for a day — just like a library has a daily rate."
DeCample said complaints heard by the attorney general's office center on Blockbuster not telling consumers that it will impose late fees again.
When the program started in January 2005, about 550 of Blockbuster's approximately 1,060 franchisees took it up as well. About 400 franchisees continue to run the program, with about 150 dropping it.
"What we have said is that the 'no late fees' program requires an initial loss of revenue because people are keeping the product out longer," Hargrove said. "Some of our franchisees can't afford this investment. It's an expensive program."
Hargrove said customers should contact their local Blockbuster to find out of the program is still active. Barzizza said his Blockbuster locations would be lenient with customers who do not know late fees were reinstated and will reimburse them.
Hargrove argues that the "no late fee" structure has worked well on the corporate end.
"During the third quarter of 2005, without late fees, we outperformed the store-based rental industry by 10 percentage points," he said. "We believe we accomplished that in large part because of our no late fee program."