Dell and its subsidiary Dell Financial Services will pay the state attorney general's office $4 million in restitution, penalties and costs to resolve charges of fraudulent and deceptive business practices, State Attorney General Andrew M. Cuomo said Tuesday.
The settlement, announced in Buffalo, concluded a two-year battle between Cuomo's office and the computer company over allegations of "bait and switch" advertising and failures to deliver on promised customer service.
Cuomo urged consumers who think they were harmed by the practices to file claims with his office.
"We spent two years fighting Dell in court," he said. "We won. Now let's get the money back to the people."
Along with providing the $4 million, the settlement requires Dell to make "sweeping changes" in its advertising, sales and financing practices, Cuomo said.
Cuomo's office sued Dell in 2007. The accusations included promotion of a zero-percent financing program for which few customers actually qualified. Instead, Dell Financial Services offered them financing at high rates, often more than 20 percent.
"Dell and [Dell Financial Services] 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," Cuomo's office said.
Cuomo also claimed that Dell misled customers about the terms of "at home" or "on site" service contracts they purchased and failed to provide consumers with promised rebates.
Domenica Cappella of Cheektowaga detailed customer-service frustrations stemming from a malfunctioning Dell desktop computer she purchased in 2005.
Her repeated efforts to obtain help from Dell to fix the problems were unsuccessful, she said. "I kept rearranging my schedule, losing time several times to be home when these calls would come," she said.
Weeks later, a technician was finally sent to her home, but he only replaced the hard drive, which did not solve the problems, she said. After more frustrations, Cappella paid for a technical support person to come to her home, and she ended up buying a new computer.
Cuomo said he wanted to help people like Cappella recover money from the settlement, "but we have to know who was damaged and to what extent."
Dell, he claimed, committed "consumer frauds" that included promises related to "at home" service promoted by the company.
In some cases, he said, customers were required to diagnose computer problems themselves with a specialist on the phone, which sometimes involved opening up their computers to get access to the components.
"The only problem with the in-home service program was it wasn't an in-home service program," Cuomo said. "Otherwise, it was great."
Cuomo's office estimated it received 3,000 complaints statewide about Dell's business practices. Dell did not return a call to comment on the settlement.
Consumers who believe they are eligible for restitution can obtain forms online at www.nyagdell.com, or by calling 1-800-771-7755. Forms must be postmarked by Dec. 15 to be considered.
To qualify for compensation, an applicant had to have been a New York State resident when he or she purchased the equipment or had a problem. Also, the problem had to have occurred after May 14, 2004. The one exception: if a Dell associate falsely advised someone of qualifying for promotional financing, that person may seek compensation if the financing of the purchase occurred after May 14, 2001.
Though the advertising and promotions scrutinized in Cuomo's case were part of a national campaign, New York is the first state to reach a settlement with Dell, Cuomo said. He said some other states have contacted his office, and he believes they will follow up with their own actions.
Chuck Bell, programs director at Consumers Union, which publishes Consumer Reports, said the settlement will provide restitution to victims and prevent similar activities. "Especially in difficult economic times, consumer fraud continues to threaten hard-working New Yorkers everywhere," he said.