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Did they have the actual disc on the shelves? Where I'm from the rental places only displayed the cover, then you picked up the disc at the counter. Not sure how theft would've been a big problem then?
I suspect it was not returning the DVDs. I'm not from the USA but recall hearing blockbuster wiped all their late fees..
They moved to a system where it would just auto-sale you the title if you kept it too long after the due date, which people were furious about when they showed up with a title that was due back a month ago. Netflix really ate their lunch though, Blockbuster online was too little too late.
Did you not have to pay a deposit for renting something?