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HELENA- Montana Attorney General Steve Bullock has reached a settlement with two Montana movie rental stores that filed negative credit reports against more than 12,000 of its former customers.

Hollywood Video and Movie Gallery closed their doors in 2009 and filed for bankruptcy. Bullock's office says the bankrupt companies, along with a collection agency working on their behalf, filed negative credit reports on 12,325 Montanans who used to be their customers.

"In today's economic environment one black mark on your credit report - even one that's illegitimate and reported by an irresponsible company - can prevent a hardworking family from buying a new home," Bullock said. "Today, we made sure that wouldn't happen and that's great news for Montana consumers."

Bullock filed a lawsuit against the collections agency in January, saying it unlawfully tried to collect money from customers.

Customers affected may have had an outstanding late fee or unreturned movie or game when the company's 24 storefront locations closed in 2009 and 2010. Many consumers were surprised to learn of the adverse credit reports and exorbitant fees when they applied for a loan or through a subscription with a credit monitoring service.

On top of rescinding any credit reports made against Montanans, Movie Gallery and Hollywood Video will be prohibited from:

• Making any further adverse reports to the national credit bureaus on any accounts or making expressed or implied threats that they will report.
• Seeking collection fees on any of the accounts.
• Attempting to collect both late changes and for the cost of the movie or game.

The settlement does allow representatives of the now-defunct company to collect legitimate debts, but they're prohibited from collecting fees or reporting the accounts to the credit bureaus.

"While there are several important protections in this settlement, what's most important for former customers of Movie Gallery and Hollywood Video to understand is that not only have the negative credit reports been rescinded, but they may never be issued again, period," Bullock added.

In announcing the settlement, Bullock also noted that his office is finalizing the details of a settlement with National Credit Solutions - the debt collection company that worked on behalf of the video rental stores. That settlement will also have strong protections for Montana consumers, including those who paid the collection agent with the hope of preserving their credit score, the attorney general said.

After Bullock filed suit in Montana, his counterparts in many other states formed a working group to investigate the actions of the bankrupt company. It was quickly discovered that the impacts of this case were national in scope, affecting millions of consumers. Today, all 50 states and the District of Columbia have joined in this settlement.

If a Montanan finds that a negative credit report from the defunct company, or the debt collector, remains on their credit report, they should immediately contact the Office of Consumer Protection at (800) 481.6896 or (406) 444.4500.

The Attorney General's Office will be sending more specific information to each of the Montanans who are affected by this settlement.

Contact Irina Cates