TOPEKA – (May 12, 2011) – Kansas Attorney General Derek Schmidt today announced a settlement to resolve allegations of unfair debt collection practices of Hollywood Video and Movie Gallery by customers nationwide. The settlement affects 19,903 former Kansas customers.
“Numerous Kansans contacted our office regarding these debt collection practices from Hollywood Video and Movie Gallery accounts,” Schmidt said. “Ensuring that debts are properly and fairly collected is important to consumers and businesses, so we are pleased this agreement has been reached.”
Hollywood Video had 3.3 million total consumers at video rental stores in all 50 states, including 45 locations in Kansas. After filing for bankruptcy in 2010, its accounts receivable were assigned to National Credit Solutions (NCS), a debt collection agency.
Consumers reported numerous problems, including finding that NCS had reported negative credit information to credit bureaus without providing consumers advance notice or the opportunity to challenge the debt. Many consumers only discovered the claimed debt when their credit was negatively affected and they were denied credit or had credit limits lowered.
In the agreement, the bankruptcy trustee, Movie Gallery, Inc. Bankruptcy First Term Lenders Liquidating Trust, agreed to cancel all previously submitted credit reports and not to submit any future credit reports or charge collection fees or interest on principal amounts consumers owe.
The settlement applies only to the trustee; it does not affect any third party debt collection practices. It was filed with the U.S. Bankruptcy Court for the Eastern District of Virginia, Richmond Division.