New York AG Sues Dell for Deceptive Marketing
New York’s attorney general has filed suit against Dell Inc. over promotional financing offers, rebates and extended customer service contracts.
The civil suit charges Dell and its Dell Financial Services division with fraud, false advertising and deceptive business practices, including bait-and-switch financing and failure to honor rebates. If successful, the suit could end up costing Dell upwards of $5 million to $10 million, depending on how many consumers register complaints.
The AG has already fielded 700 complaints and expects “thousands” more now that the suit has been made public, a spokesperson said.
This is the first legal action against Dell, but it might not be the last: Attorney General Andrew Cuomo said his office will speak with other state attorneys general, and more legal action may follow.
New York’s suit, filed on May 14, seeks reimbursement and $2,000 in damages for each New York consumer affected by the service, as well as $500 to the state for each violation.
The suit accuses Dell of bait-and-switch deceit in promotional financing, offering consumers loans at no interest or with no-payment periods. But Dell Financial Services “uses ultra-restrictive underwriting guidelines” that disqualifies nearly 85% of applicants; then Dell offers those consumers a “Dell Preferred” account, an open line of credit at interest rates topping 20%, according to court documents. Dell doesn’t distinguish the two plans clearly, so consumers think they’re financing their purchase at no interest, but end up paying exorbitant rates, the court documents report.
Dell sales associates get an extra commission when consumers finance through DFS, so they push promotional financing, the suit says. Associates tell shoppers they’ll “simply check” if a consumer qualifies for promotional financing, then use the consumers’ information to apply for the high-interest open line of credit, often without consumers’ consent, according to court documents.
The suit also charges Dell with “inducing” consumers with rebates, then failing to follow through and giving consumers “the runaround” when they inquire about rebate payments.
Further, it charges Dell with breach of contract for failing to provide technical support promised in its extended service contracts. The suit also accuses Dell of running ads that mislead consumers into thinking it provides technical service 24 hours a day.
Dell has until June 15 to respond to the suit in court. Dell did not respond to requests for comment by presstime.
