• by Wendy Davis  @wendyndavis, August 2, 2012

Blockbuster will revise its record-keeping practices in order to settle a class-action lawsuit accusing it of violating a federal video privacy law, court records show.

Specifically, Blockbuster says it will inform customers how to terminate their accounts and will honor requests of former customers to separate their rental histories from their personal information.

The company also agreed to pay the lawyers who brought the case up to $140,000.

The deal still must be approved by U.S. District Court Judge John Tunheim in Minnesota.

If approved, the settlement will resolve a class-action lawsuit filed last year by solve a September 2011 class action lawsuit filed by Minnesota resident Baseem Missaghi. He alleged that Blockbuster unlawfully kept "a virtual digital dossier on millions of consumers nationwide" and that the company's records contain "a highly detailed account of their video viewing histories and preferences."

Missaghi argued that Blockbuster violated the Video Privacy Protection Act, which requires movie rental companies to destroy personally identifiable information as soon as it is no longer needed. The law also prohibits movie rental services from disclosing information about the movies people watch without their consent. Congress passed the statute in 1988, after a newspaper in Washington printed the video rental records of Supreme Court nominee Robert Bork.

Blockbuster and Missaghi said in April that they had agreed on the main terms of a settlement, but didn't reveal the details until last month, when they quietly filed court papers seeking approval of the deal.

Blockbuster rival Netflix recently agreed to settle a similar lawsuit for $9 million. Netflix also promised to "decouple" former customers' movie-rental history from their personal information within one year of cancellation. In the past, Netflix allegedly stored the information for up to two years after cancellation. U.S. District Court Judge Edward Davila in the Northern District of California will consider whether to approve that settlement at a hearing in December.

Movie rental company Redbox, which also was sued for violating the video privacy law, recently prevailed in one of the legal issues in the case. The company convinced the 7th Circuit Court of Appeals that consumers don't have the right to sue for monetary damages when companies unlawfully retain records, as opposed to disclosing them. That lawsuit is continuing because the consumers aren't just seeking monetary compensation, but also want an injunction forcing Redbox to change its alleged practices.