Risk Management

New Sheriff in Town

Andrew Cuomo, Eliot Spitzer's successor as New York attorney general, accuses Dell and its consumer finance affiliate of deceptive sales practices ...
Stephen TaubMay 16, 2007

Warning to Corporate America: Don’t expect a docile New York AG now that Eliot Spitzer is in the governor’s mansion.

Andrew M. Cuomo, who took over as the state’s attorney general at the beginning of this year, said his office has filed suit in Albany County Supreme Court accusing computer giant Dell Inc. and Dell Financial Services LP of deceptive sales practices and bait-and-switch financing tactics, and of failing to provide adequate customer service. DFS is a joint venture between Dell and CIT Bank, which offers financing to consumers for their Dell purchases.

The suit alleges that Dell and DFS engaged in numerous other deceptive business practices relating to technical support, promotional financing, rebate offers, and billing and collection activity. “At Dell, customer service means no service at all,” according to a statement by Cuomo, son of former New York governor Mario Cuomo. “Dell’s consumers were intentionally misled, and they had to pay for that privilege.”

Dell spokesman Bob Pearson told The Wall Street Journal in an e-mail statement that the company would fight the complaint. “Our customers are our top priority at Dell,” he wrote, according to the newspaper. “We are confident that our practices will be found to be fair and appropriate.” A call by CFO.com to Dell was not immediately returned.

Cuomo said that Dell deprived consumers of the technical support to which they were entitled under warranty or service contracts, repeatedly failing to provide timely onsite repairs even though consumers had purchased service contracts promising “onsite” and expedited service. Instead, the defendants pressured consumers to remove the external cover of their computer and remove, reinstall, and manipulate hardware components, the suit charged.

It also accused Dell of 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, Cuomo added. He alleged that Dell used “refurbished,” but defective, parts or computers in its repairs or in replacing equipment.

The sweeping lawsuit also accused Dell of luring consumers with advertisements that offered attractive “no interest” or “no payment” financing. “In practice, however, the vast majority of consumers, even those with very good credit scores, were denied these deals,” the state’s press release said. In what Cuomo called a classic bait-and-switch, DFS instead offered consumers financing at high interest rates, which often exceed 20 percent.

Dell and DFS also 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 AG claimed.

Cuomo is seeking restitution from Dell and DFS to aggrieved consumers, along with civil penalties and adoption of measures to ensure that they do not engage in deceptive, illegal, and fraudulent practices in the future.

Despite the news, Dell’s stock on Wednesday climbed more than 5 percent.