I think if you were to do this today, the video store would report to the credit bureaus do they could make you a little less likely to get an apartment or that next job.
It varies on sector. Banking/financial is much more likely to do this than other sectors. It's also more common lower down the economic ladder, just one more way we punish the poor for their poverty.
Dunno if it’s common, but the justification I’ve heard is that if you have financial problems you’re more likely to be tempted to commit petty theft and/or embezzlement to compensate.
My wife and I were always able to wait out Family Video. If we had a late fee on one account we'd use the other's account until we got a call to come back, get the late fee forgiven, and get a free rental or something.
They didn't survive the pandemic, but I doubt that was the tipping point.
So I think we've made progress...