Hollywood Video, Movie Gallery Settle Over Consumer Complaints

A trustee for the now-bankrupt Hollywood Video and Movie Gallery chains has agreed to repair the credit reports of millions of consumers to settle allegations of misconduct by debt collectors hired to collect on the rental chains' accounts, according to a settlement announced by the attorneys general of all 50 states and Washington, D.C.

After the video rental chains went bankrupt in 2010, a liquidating trust hired debt collectors to collect an estimated $244 million in outstanding debts reportedly owed by 3.3 million former customers. It was then that states started getting consumer complaints from former customers over fees and damaged credit -- with many claiming they didn't owe the money in the first place.

"Collection laws require that consumers have a chance to pay or dispute their debts," said Washington state Assistant Attorney General Mary Lobdell in a statement. "But starting in October, we received a flurry of complaints from Washington residents who told us they didn't owe the fees or were never informed of these debts before they were reported to the credit bureaus."