GameFly won't fly with scratched discs

According to various online sources, GameFly members who have recently
rented Xbox 360 games and returned them scratched have been getting notices informing them about the current issue with the Xbox 360 damaging discs and what will happen if you return another damaged Xbox 360 disc:

"We have received reports that certain XBOX 360 consoles have caused
damage to GameFly videogames. Unfortunately, we have been notified that
you recently returned a damaged XBOX 360 game. As a precaution, we have removed all XBOX 360 games from your GameQ.
Please contact Microsoft at 1-800-4MY-XBOX. Please do not rent XBOX 360
games until you have resolved this issue. In the future, should GameFly receive XBOX 360 games from you that have been damaged, you will be charged a replacement fee."

Microsoft, of course, holds their ground on the issue saying that consoles that are causing damage to discs are only an isolated issue and nothing to be bothered about.

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