Thursday, September 17, 2009

Dell Agrees to $4 Million Restitution, Penalties to Settle False Advertising Case

This posting was written by William Zale, Editor of CCH Advertising Law Guide.

New York Attorney General Andrew M. Cuomo has announced that Dell and its subsidiary, Dell Financial Services (DFS), have agreed to pay the attorney general’s office $4 million in restitution, penalties, and costs to resolve charges of fraudulent and deceptive business practices that scammed consumers across New York State.

The settlement follows a decision of the New York Supreme Court, Albany County (CCH Advertising Law Guide ¶63,084), which held that Dell engaged in repeated misleading, deceptive, and unlawful business conduct, including false and deceptive advertising of financing promotions and warranty terms, in violation of New York law.

The lawsuit charged that Dell engaged in bait and switch advertising with respect to its “no interest” financing promotions, misled consumers to believe they had qualified for promotional financing, failed to adequately disclose the terms of its “next day” service contracts, and failed to provide consumers with warranty service and promised rebates.

Mandated Disclosures

Along with the $4 million in restitution, penalties, and fees, the settlement also requires Dell to make sweeping changes to its advertising, sales and financing practices, according to the attorney general’s press release.

Among other things, Dell will be required to advise consumers before they purchase an “at home” or “on site” service contract that they may be required to engage in diagnostic activity over the telephone that includes consumers themselves opening their computers to access internal components. The settlement also requires Dell to disclose in its advertisements for promotional financing the estimated percentage of consumers who will actually qualify for the promotion.

Consumer Claims

New York consumers who were harmed can file a claim for restitution using special claim forms posted on the attorney general’s website,

Eligible New York consumers include:

• Consumers who financed their computers (and paid interest) after being led to believe that they had qualified for a no-interest promotion (e.g., 90 days, 6 months, 12 months);

• Consumers who did not receive promised rebates;

• Consumers who had difficulty getting Dell to make repairs that were covered by a Dell warranty or service contract;

• Consumers who did not get the promised next day/on site service under service contracts.

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