Blockbuster Inc. has agreed to pay about $630,000 to settle claims by 47 states and the District of Columbia that the nation's biggest movie rental chain deceived consumers with its "No Late Fees" cam

PORTLAND, Ore. (AP) -- Blockbuster Inc. has agreed to pay about $630,000 to settle claims by 47 states and the District of Columbia that the nation's biggest movie rental chain deceived consumers with its "No Late Fees" campaign, the Oregon attorney general said March 29.

The agreement, disclosed by the office of Oregon Attorney General Hardy Myers, also requires Dallas-based Blockbuster to make refunds to consumers who claim the campaign misled them into thinking they could keep the video or DVD for as long as they liked.

Many consumers were angry to discover that overdue game and film rentals were automatically converted to a sale on the eighth day after the due date. If they then tried to return it, they were charged a $1.25 restocking fee.

According to the agreement, Blockbuster will have to make a refund to consumers who were either charged the restocking fee or paid the full price of the movie they rented.

The Blockbuster payment of $630,000 is to reimburse states for their legal costs. The cost of the refunds would be in addition to that amount.

As part of the settlement, Blockbuster will also have to "dramatically alter" the way it advertises its "no late fees" policy, according to a prepared statement by Pennsylvania Attorney General Tom Corbett.

Blockbuster spokeswoman Karen Raskopf said that the "no late fees" program will continue, but the company has agreed to add signage in its stores to better explain the fine print. "We think our original communications were very clear, but we're happy to do whatever we can to add additional communication to better inform our customers," she said.

The company has already added the signs to most of its stores, she said, as well as created an information center where customers can read up on the program. She added that 96% of Blockbuster's customers return the movies within the seven-day grace period. "Less than 4% of our customers are going to the auto-purchase program."

Blockbuster launched the "no late fees" program at its 4,600 U.S. stores on Jan. 1, in the wake of online subscriber Netflix Inc.'s success. Netflix allows consumers to rent up to three DVDs per month for a flat monthly fee of $17.99. They can keep the movies for as long as they want -- but can only get a new one once they return the ones they have already viewed.

The states that are not included in the settlement are New Jersey (which has a pending separate suit), Vermont and New Hampshire.

In trading Tuesday afternoon, Blockbuster shares fell 10 cents, or 1.1%, to $8.82 on the New York Stock Exchange. The stock has traded in a 52-week range of $6.50-$17.87.

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