NEW YORK - New York Attorney General Andrew Cuomo accused Dell Inc. and its financial services affiliate of "bait and switch" advertising and failing to deliver on promised customer service.
Round Rock, Texas-based Dell lured customers with zero percent financing, then switched them to a higher rate without their knowledge at the time of purchase, according to the lawsuit.
Cuomo announced details on Wednesday of a lawsuit filed a day earlier in the New York Supreme Court, claiming that Dell and Dell Financial Services LP engaged in fraud, false advertising and deceptive business practices.
Dell denied those charges in a written statement from spokesman Bob Pearson.
"We are confident that our practices will be found to be fair and appropriate," Pearson said. "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."
Cuomo said his office had "received an unprecedented number of complaints against Dell, approximately 700 and they keep coming."
"We want fairness," Cuomo said Wednesday. "Either provide the customer service packages that you sell or don't sell the packages."
That number is not representative of the company's six million transactions in New York State between 2003 and 2006, said 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 frequently advertises zero percent financing plans for computer purchases, the attorney general said that as many of 85 percent of those who applied did not receive that rate.
Paul Reisner, of Rye, said his excellent credit rating was permanently scarred following such a deception. The computer programmer said he was offered zero percent financing for six months, during which he paid off his US$1,500 computer. He was then informed he had never qualified for the rate and was obligated to pay a 29 percent interest rate, he said.
"Why did I not qualify for promotional financing?" he asked. "I own my own home, always pay my bills on time."
The lawsuit also claims that Dell sold onsite computer repair plans but failed 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 by Dell that they would have to open the body of their computer.
"We both have arthritis in our knees," she said. "And to tell my husband to get down on the floor ... I'll never buy another Dell."
The lawsuit seeks an order requiring Dell to pay unspecified damages to affected customers and the state is also seeking penalties and costs.
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 shake-up 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 competitors who have eaten into Dell's market share.
