Bankrupt video store sends collection letters

January 31, 2012 4:16:02 PM PST
A bankrupt video store is sending out bills to customers and you may be getting one soon. The collection letters say customers owe money or late fees for movies that never got returned. But some customers say they never rented the movies in question.

Few signs remain of Hollywood Video's stores, but while the chain is in bankruptcy the long arm of its collections lives on.

Former Hollywood Video customer Julia Stigler said, "I was intimidated when I saw 'collections.'"

And why not? Stigler says she got a debt collection letter last week which says she owes $119.75 to the legal successor of Hollywood Video. The chain disappeared after filing for bankruptcy two years ago.

"I know do not owe that, this is why I called you," Stigler insisted. "I know I don't owe that."

Stigler's bill includes late fees for 13 movies dating back to 2009, but it lists titles she's never even heard of. Stigler says she tried to call the collection agency to clear up the matter, but was not successful.

It turns Hollywood Video's bankruptcy receiver hired three collection agencies across the country to collect old bills. Many former customers are getting those bills and, like Stigler, say they don't owe the money.

University of Houston law professor Richard Alderman explained, "You don't have an obligation to pay. What you do, in fact, have is the right to more information."

The collections notice makes it very clear how much people owe. What's harder to see are the words on the back of the notice which explain your rights to dispute the charges.

Alderman advised, "I would include a letter mentioning that I am aware of my rights under the Fair Debt Collection Practices Act. I don't believe I owe this debt. I expect you to give me more information about when the debt was incurred, where this was incurred and dispute it."

Alderman says if you owe Hollywood Video money, you should pay it. If you do not, dispute the bill

"My guess is that people who dispute this, it's probably going to make it go away," he said.

The bankruptcy receiver sent out about 200,000 collection letters went out. The receiver has agreed to not report unpaid collection notices to the credit reporting bureaus, so the bill so this will not harm your credit. However, write a letter disputing the charge and if the debt is cleared, get that in writing.
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