Dell Gets Slapped by New York Over Financing and Debt Collection Practices

Personal computer giant Dell, Inc., and its financing unit Dell Financial Services (DFS), “engaged in fraud, false advertising, deceptive business practices and abusive debt collection” according to a ruling from a judge in New York Tuesday.

The ruling was made by New York State Supreme Court Justice Joseph C. Teresi on a case initially brought by New York Attorney General Andrew Cuomo. The initial ruling says that Round Rock, Texas-based Dell (Nasdaq: DELL), and its DFS unit, are prohibited from engaging in the practices outlined in the suit. Further proceedings will “determine how much restitution Dell will have to pay to its customers and the amount of profits Dell unlawfully earned that must be forfeited to the state.”

Justice Teresi concluded that Dell lured consumers to purchase its products with advertisements that offered attractive “no interest” and/or “no payment” financing promotions. In practice, however, the vast majority of consumers, even those with very good credit scores, were denied these deals.

The decision also held that DFS incorrectly billed consumers on cancelled orders, returned merchandise, or accounts they did not authorize Dell to open, and then continually harassed these consumers with illegal billing and collection activity.

Cuomo commented in a press release, “For too long at Dell the promise of customer service was a bait and switch that left thousands of people paying for essentially no service at all. We have won an important victory that will force Dell to live up to its responsibilities and pay back its customers for profits that were pocketed but not deserved. This decision sends an important message that all corporations will be held accountable for the promises they make to consumers.”

Business magazine Buffalo Business First reported that Dell “will have a comment once its attorneys have had a chance to completely review the decision.”

DFS is a joint venture between Dell and CIT Bank to offer financing to consumers for Dell’s computer products.