N.Y. sues Dell over sales practices

Paul Reisner says he had an excellent credit rating - until he got what he thought was a good deal on a Dell computer. Reisner, a computer programmer, said he was offered zero percent financing for six months, during which he paid off his $1,500 computer. He said he was then informed he had never qualified for the rate and was obligated to pay a 29 percent interest rate.

"Why did I not qualify for promotional financing?" asked Reisner, of Rye, who said his credit rating was permanently scarred. "I own my own home, always pay my bills on time."

New York Attorney General Andrew Cuomo has similar questions. He accused Dell Inc. and its financial services affiliate in New York Supreme Court on Wednesday of "bait and switch" advertising practices and failing to deliver on promised customer service.

The lawsuit claims that Dell and Dell Financial Services LP engaged in fraud, false advertising and deceptive business practices.

Dell spokesman Bob Pearson denied the charges in a written statement.

The lawsuit accuses Dell of luring customers with ads for zero percent financing and then, at the time of purchase, tricking buyers into higher interest rates, often without their knowledge.

Cuomo accused the company of selling "onsite" computer repair plans but failing to deliver, at times requiring customers to disassemble their own computers.

Jaqueline Scofield, 75, said she was outraged when she and her husband were told they would have to open the body of their computer.

"We're both not young. We both have arthritis in our knees. And to tell my husband to get down on the floor ... I'll never buy another Dell," she said at a Manhattan news conference.

Cuomo said his office had "received an unprecedented number of complaints against Dell, approximately 700, and they keep coming."

The company had 6 million transactions in New York State between 2003 and 2006, said another Dell spokesman, Bob Kaufman.

Kaufman cited a decline in complaints submitted to the Better Business Bureau against Dell. That number dropped 12 percent nationwide between 2005 and 2006, while the number of complaints against Dell Financial Services dropped 43 percent in the same period, said Carrie Hurt, president and CEO of the BBB of Austin, Texas.

While Dell, based in Round Rock, Texas, frequently advertises zero percent financing plans for computer purchases, Cuomo said that as many as 85 percent of those who applied did not receive that rate. The suit claims that some sales representatives misled customers, allowing them to believe they had qualified for the promotion.

Cuomo also said customers who called Dell's technical support line often experienced lengthy waits, were shuttled from representative to representative and had their calls disconnected.

The lawsuit seeks an order requiring Dell to pay unspecified damages to affected customers, a $500 payment to the state for each instance of some violations, and another $2,000 for additional costs.

"We are confident that our practices will be found to be fair and appropriate," said Pearson. "While even one dissatisfied customer is too many, the allegations in the AG's filing are based upon a small fraction of Dell's consumer transactions in New York."

In an unrelated probe, the Securities and Exchange Commission and Dell's own audit committee have been investigating the company's accounting practices.

In recent months, Dell has seen a management shakeup that included the departure of several top executives - including Chief Executive Officer Kevin Rollins and Chief Financial Officer Jim Schneider - and the return of Michael Dell as CEO.

With Dell at the helm, the company has been trying to orchestrate a turnaround plan to improve customer service and combat Hewlett-Packard Co. and other electronics manufacturers that have eaten into Dell's market share with low-cost, low-profit PCs.

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On the Net:

Dell Inc.: http://www.dell.com

NY attorney general: http://www.oag.state.ny.us