Dell to Pay $4 Mil. in Settlement Over Deceptive Ads

Dell agreed to pay $4 million in restitution, penalties and costs to resolve charges of “fraudulent and deceptive business practices that scammed consumers across New York State,” according to a statement from New York Attorney General Andrew Cuomo’s office, which originally filed a lawsuit against the PC manufacturer in 2007.

The charges centered on the way the company advertised cheap financing and warranties. The state attorney general said the Texas-based company engaged in a “classic bait-and-switch scheme” offering attractive “no-interest” and “no-payment” financing promotions. Cuomo’s office said even consumers with solid credit scores were denied those deals and instead offered financing at high rates that often exceeded 20 percent. Cuomo’s office also alleged that the company regularly failed to provide support services customers had paid for, leaving them with worthless warranties.

Dell denied the charges, but last year the New York Supreme Court sustained Cuomo’s allegations, leading to the settlement, announced Sept. 15.

“Today’s announcement is the final step in ensuring New Yorkers harmed by Dell’s deceptive and illegal business practices are fully compensated,” Attorney General Cuomo said in a statement. “Going forward, this deal means that Dell will have to clearly and fully disclose the terms and conditions of their products and services, to avoid this kind of fraud at the consumer’s expense. My office is committed to ensuring a fair and honest marketplace across New York by rooting out these unlawful practices, and we encourage anyone who was ripped off by Dell to come forward and file a claim to get their money back.”

Along with the $4 million, the settlement also requires Dell to make “sweeping changes to its advertising, sales and financing practices.” Among other things, Dell will be required to advise consumers, before they purchase an “at home” or “on-site” service contract, that they may be required to engage in diagnostic activity over the telephone that includes consumers themselves opening their computers to access internal components. The settlement also requires Dell to disclose in its advertisements for promotional financing the estimated percentage of consumers who will actually qualify for the promotion.

A Dell spokesman said the company cooperated with Cuomo’s office to address their concerns. “The case was based on a small number of complaints representing a very small percentage of the millions of Dell transactions in New York during the period [back to 2004],” Jess Blackburn, a Dell representative, said in a statement. “Dell had previously resolved many of these issues directly with affected customers before this settlement and, in fact, before the original lawsuit was filed.”


— Nielsen Business Media