McDaniel settles with video rental companies

Attorney General Dustin McDaniel announced that Arkansas, along with 49 other states and the District of Columbia, reached a settlement with the bankruptcy trustee for Movie Gallery and Hollywood Video regarding widespread reports of unfair debt collection practices.

Movie Gallery and Hollywood Video operated video rental stores in all 50 states, with 89 storefronts in Arkansas. According to Movie Gallery’s records, it had over 900,000 Arkansas customer accounts. Movie Gallery filed for bankruptcy in 2010, and its accounts receivable were assigned to National Credit Solutions (NCS), a debt collection agency.  More than 43,000 accounts placed with NCS were allegedly for debts owed by Arkansans.

After NCS took over, numerous reports of abusive debt collection practices emerged. McDaniel’s office began receiving complaints during the last half of 2010.

“Complaints about abusive collection practices are the fastest-growing area of consumer complaints received by my office,” McDaniel said. “The type of conduct revealed in this matter will not be tolerated.”

Arkansas consumers complained that NCS reported negative credit information to credit bureaus on a widespread basis, without providing consumers advance notice or the opportunity to challenge the debt.

Many consumers disputed owing any debt to Movie Gallery. Consumers first discovered the claimed debt when they were either denied for a credit application or had their credit card limits lowered as the result of the negative credit report filed by NCS.

In the agreement, the bankruptcy trustee, Movie Gallery, Inc. Bankruptcy First Term Lenders Liquidating Trust, agreed to provide immediate consumer relief by:
• Canceling all previously submitted credit reports by NCS;
• Refraining from submitting any future negative credit reports;
• Refraining from charging or attempting to collect collection fees or interest on principal amounts they claim consumers owe;
• Refraining from charging double for late fees; and,
• Protecting consumers from future abusive practices in collection of the accounts assigned to collection agencies.

The settlement protects approximately 3.3 million total consumers nationwide, including 43,436 Arkansas consumers. The settlement does not resolve any claims of misconduct by the collection agencies that either affected consumers or the state may wish to pursue.