Fraud ruling against Dell validates years of gripes

New York state court rules that the computer manufacturer engaged in "fraud, false advertising, deceptive business practices, and abusive debt collection practices."

In December of 2002, I started a page on my Computer Gripes site devoted to Dell.

Accumulating gripes about Dell was like taking candy from a baby; there was no sport in it. Eventually, I gave up maintaining the page, but despite a total lack of advertising or promotion, people kept finding the page and adding their own gripes.

Now these Dell gripes are official.

The Office of New York State Attorney General Andrew Cuomo won a lawsuit on Tuesday against Dell and affiliate company Dell Financial Services (DFS). The illegal activity involved both computers and finance. According to a government statement, "Dell and DFS engaged in fraud, false advertising, deceptive business practices, and abusive debt collection practices." Wow.

The Associated Press reports that the attorney general's office had 700 complaints when the lawsuit was filed and has received more than 1,000 since. And that's just in New York.

"For too long at Dell," Cuomo was quoted as saying, "the promise of customer service was a bait and switch that left thousands of people paying for essentially no service at all."

State Supreme Court Justice Joseph C. Teresi, who made the ruling, said, "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."

On the computer side, the decision says (the bullet points below are taken directly from the official statement) that customers were deprived of warranty tech support by Dell:

  • Repeatedly failing to provide timely on-site repair to consumers who purchased service contracts promising "on-site" and expedited service;
  • Pressuring consumers, including those who purchased service contracts promising "on-site" repair, to remove the external cover of their computer and remove, reinstall, and manipulate hardware components;
  • Discouraging consumers from seeking technical support; those who called Dell's toll-free number were subjected to long wait times, repeated transfers, and frequent disconnections; and
  • Failing to provide rebates that were promised to consumers.

On the financial side, Justice Teresi concluded that "Dell lured consumers to purchase its products with advertisements that offered attractive "no interest" and/or "no payment" financing promotions. In practice, however, the vast majority of consumers, even those with very good credit scores, were denied these deals. In a classic 'bait and switch' scheme, DFS instead offered consumers financing at high interest rates, which often exceeded 20 percent. Dell and DFS frequently failed to clearly inform these consumers that they had not qualified for the promotional terms, leaving many to unwittingly finance their purchase at high interest rates."

The response from Dell, besides disagreeing with the ruling, was that not many people complained. The same AP story quotes a Dell representative, who says, "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," and it reports earlier statements by Dell that the company "had 6 million transactions in New York between 2003 and 2006, with alleged complaints representing only a tiny fraction."

To help draw your own conclusion, read the original decision and order (PDF).

See a summary of all my Defensive Computing postings.

About the author

    Michael Horowitz wrote his first computer program in 1973 and has been a computer nerd ever since. He spent more than 20 years working in an IBM mainframe (MVS) environment. He has worked in the research and development group of a large Wall Street financial company, and has been a technical writer for a mainframe software company.

    He teaches a large range of self-developed classes, the underlying theme being Defensive Computing. Michael is an independent computer consultant, working with small businesses and the self-employed. He can be heard weekly on The Personal Computer Show on WBAI.

    Disclosure.

     

    Join the discussion

    Conversation powered by Livefyre

    Don't Miss
    Hot Products
    Trending on CNET

    HOT ON CNET

    Looking for an affordable tablet?

    CNET rounds up high-quality tablets that won't break your wallet.