Dell found guilty in New York of misleading, harassing customers

Dell on Tuesday lost a major judgment in New York, in a case that centered around its financing practices for customers in which it was accused of defrauding and even harassing some.

The case was brought by the state's attorney-general Andrew Cuomo one year ago, and alleged that Dell failed to provide "zero-percent financing" to as much as 85% of the customers to whom that rate was promised, or who were otherwise entitled to such a rate. Dell then failed, the suit alleged, to provide customers with the customer support to which they were clearly entitled.

"Respondent Dell has engaged in repeated misleading, deceptive and unlawful business conduct, including false and deceptive advertising of financing promotions and the terms of warranties, fraudulent, misleading, and deceptive practices in credit financing and failure to provide warranty service and rebates," states this afternoon's ruling from Justice Joseph Teresi (PDF available here).

Justice Teresi went on to say certain petitioners were entitled to restitution, though the amount has yet to be determined.

According to a statement from A-G Cuomo's office this afternoon, Justice Teresi apparently agreed with evidence showing that Dell customers were not informed they could qualify for lower interest rates or better terms, and were instead charged as much as 20% interest on their purchases. Those who complained, Teresi found, were subjected to illegal harassment and false billing.

To help make their case, petitioners for the plaintiffs submitted several Dell advertisements. "The ads offer such promotions as free flat panel monitors, additional memory, significant rebates and instant discounts in very large point print in contrasting color," Justice Teresi wrote.

"They also include offers of very attractive financing, such as no interest and no payments for a specified period of time in prominent positions and similar large fonts and colors. While there is fine print below the financing offers limiting them to 'well qualified' customers, and after certain litigation, 'best qualified' customers, nothing in the ads indicate what standards are used to determine whether a customer is well qualified.

"There is also no indication of how many customers are likely actually to qualify," the ruling continues. "Petitioner's submissions indicate that as few as 7% of New York applicants qualified for some promotions. Petitioner has submitted several affidavits from consumers alleging that they saw these ads and were persuaded to call or access Dell's Internet site to shop for a computer because of the financing promotions. However, most applicants, if approved for credit, were offered very high interest rate revolving credit accounts ranging from approximately 16% up to almost 30% interest without the prominently advertised promotional interest deferral."

In his statement this afternoon, Cuomo said, "For too long at Dell the promise of customer service was a bait and switch that left thousands of people paying for essentially no service at all. We have won an important victory that will force Dell to live up to its responsibilities and pay back its customers for profits that were pocketed but not deserved. This decision sends an important message that all corporations will be held accountable for the promises they make to consumers."

This evening, Dell spokesperson Jess Blackburn issued this statement to BetaNews on behalf of the company: "We don't agree with this decision and will be defending our position vigorously. Our goal has been, and continues to be, to provide the best customer experience possible. We are confident that when the proceedings are finally completed the court will determine that only a relatively small number of customers have been affected."

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