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Dell accused of using "bait and switch" advertising with PC financing

This week New York Attorney General Andrew Cuomo filed a lawsuit against Dell Inc. According to the claim, Dell deceived customers by using "bait and switch" advertising practices to lure in new business. Cuomo claims that Dell advertised zero percent financing, but at the time of purchase switched over to a high interest rate plan without notifying the customer.

Cuomo claims that that while one or two customers are minor problems, a large number of customers have complained about the same issue. Cuomo told reporters that his office "received an unprecedented number of complaints against Dell, approximately 700 and the numbers keep growing."

Representatives from Dell say that the claims are uncalled for and unjustified. "We are confident that our practices will be found to be fair and appropriate," indicates Dell spokesperson Bob Pearson.

According to Pearson, the Round Rock, Texas-based company is innocent of all wrong doing, but did indicate that a limited number of customers complained. "While even one dissatisfied customer is too many, the allegations in the AG's filing are based upon a small fraction of Dell's consumers transactions in New York," says Pearson.

Pearson indicates that while many applied for Dell's zero percent financing option, as many as 85-percent of those applied did not receive the plan. Paul Reisner was one of many who were not offered Dell's promotional plan even though he has an excellent credit rating.

"Why did I not qualify for promotional financing?" asked Reisner. "I own my own home, always pay my bills on time."

Over the last several months, the spot light has been put on Dell more than once, but unfortunately not for good reasons. Most recently, Kevin Rollins resigned as Dell's CEO, throwing quite a surprise to many outside of the company as well as those within it. Rollins was credited with much of Dell's recent success but also blamed for the loss of market share to rival HP.

Late last year, Dell was sued for allegedly supplying incorrect processors to customers. Zhan Min filed a suit against Dell after contacting Dell to try to rectify the situation. Min reported that Dell shipped him a laptop with an Intel T2300 processor but advertised a T2300E -- the difference being Intel's Virtualization Technology. When Dell told him that there weren't any differences between the two processors, Min sued.



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Credit problems?
By kibets on 5/17/2007 3:45:41 PM , Rating: 5
If you have excellent credit you will get attractive financing. Those unfortunate souls with average to poor credit will pay dearly. Not only at Dell but any company engaged in the business of offering financing.

No news here.




RE: Credit problems?
By wallijonn on 5/17/2007 4:17:02 PM , Rating: 5
quote:
If you have excellent credit you will get attractive financing.


If you have excellent credit chances are that you can pay cash for the full amount. Therefore a 0% finance rate can be used to sway the customer to make the purchase, so that the customer can use his money elsewhere. But baring that, why bother buying from Dell?


RE: Credit problems?
By caqde on 5/18/2007 3:14:32 AM , Rating: 4
Wrong. Sorry, but I have excellent credit and guess what I make 0, nothing, nada, zip (Full Time Student: live off loans). Thats right I don't have a job. Credit is not based off of your income alone or even that large of a factor. It's your ability to pay your bills on time and prove that you can keep promises that builds credit, not how much you make.

Although it is possible for a person with a high credit to put that new computer on a brand new credit card with a 0% introductory apr though, but it is wrong to think that they can just pay cash for it. Credit != Income.


RE: Credit problems?
By Xerstead on 5/18/2007 4:21:05 PM , Rating: 2
I used to deal with a few different finance options when i worked in sales.
The Banks charge the retailer to set up a Defered 0% interrest option, I cant remember if i saw the figures but believe it was in the region of 5-10% (will vary between banks etc) but the banks will PAY the retailer to set up a 'interest from day 1' as the bank will make money from it.

The above was covered in one of our sales meetings. We were meant to get people on the 'from day 1' option but the company heavily advertised the 'interest free' option to get people through the door.

It is possible that the company decides your credit rating is too high and you will pay off the amount before the interest kicks in. If you did this they could stand to loose money on that sale depending on profit margins etc. So they offered you a higher rate they could make money on.


RE: Credit problems?
By Rugar on 5/18/2007 5:50:43 PM , Rating: 2
I'm not sure that this is how Dells deferred interest options are written. There are lots of banks that gladly write the "x days, zero interest financing" paper because they are playing the odds and willing to pay to do so. The number of customers who actually pay off the full principal amount within the specified time limit is actually fairly low. Less than 20% in the company that I actually know the details about. And therein lies the reason why banks are all hot and bothered to write these "x days zero interest" notes. When the customer fails to completely pay the interest off in the specified time period, the "deferred" part of the deferred interest kicks in. The bank retroactively calculates interest for that time period and applies it to the principal. Not only is the bank now charging interest for that zero interest period, it is often at a rediculous sub-prime rate approaching 20 - 30%.

So...
Buy a $1000 computer at "zero percent interest for 1 year!".
...
Fail to send in the final payment on time causing it to be 1 day late.
...
The lender is within their rights (and many WILL do this immediately) to calculate interest for the year and apply it to the principal. So... let's say you have a nice, friendly lender that only charges 19% simple, non-compounding interest. On day 366 of your $1000 loan, your total due (less payments made of course) suddenly becomes $1190 and not $1000. Why do you think sales clerks are all instructed to sell the financing plans? You pay in cash means everyone loses the chance to make extra money off of you. Financing means everyone gets a nice little bonus except for you.

Oh yes, banks will gladly write these notes and will often provide "incentives" to the companies based on percentages of customers who fail to pay off the note in time.


RE: Credit problems?
By arazok on 5/17/2007 4:21:00 PM , Rating: 3
I have a flawless credit rating, but have never gotten even close to the advertised "as low as 9.99%". I have financed two computers over the past few years, and Dell has never given me less then 16%.

The worst offence I have seen is when fishing for a coupon code to enter. I was looking for a laptop, and after seeing the "Enter coupon code" option, decided to goggle it. I found several sites offering $100 off the price of the same laptop I was building, so I gave it a whirl. These coupon sites direct you to Dell using a special URL containing the coupon # so it can be claimed. Well, Dell just inflated the price of the laptop by $100, and then applied the coupon. I opened two browsers and built the SAME computer - one with coupon, and one without. Same price.

In Dells defense, I did see other coupons where this did not apply - the discounts were real. However, those coupons were much harder to find then the ones offered from a simple goggle search.


RE: Credit problems?
By Proteusza on 5/17/2007 4:24:53 PM , Rating: 2
That should be illegal - its very misleading advertising isnt it?


RE: Credit problems?
By arazok on 5/17/2007 6:06:48 PM , Rating: 3
I think it IS illegal. Nobody enforces it.

In Canada, Sears got busted inflating their tire prices a few weeks before putting them "on sale" for the same price as before the price increase....Guess how many years they got away with that one.

Except for the occasional PR campaign by the feds, it's largely buyer beware.


RE: Credit problems?
By darkpaw on 5/17/2007 4:36:21 PM , Rating: 2
Dell seems to do stuff like this on a normal basis. I was helping a friend pick out a laptop a few months back. They have their normal starting points low/mid/high equiped for each chassis. Starting with the low one actually saved $100 of the medium and like $200 over the high end even going with all the same options and ending up at the same specs.

Dell really has some tricks on their site.


RE: Credit problems?
By kibets on 5/17/2007 4:52:04 PM , Rating: 2
Oh... Dell always give me 90 days to pay at zero finance charge (same as cash) and sometimes a year. I pay within 90 days. Never tried to make payments as a credit card.

They do seem to like to play price games with their systems. It is hard to order the same thing twice in a row and come up with the same price.

I have never purchased from anyone but Dell so I don't know if the competition is the same.


RE: Credit problems?
By bighairycamel on 5/18/2007 7:19:59 AM , Rating: 2
That't terrible reasoning. And I find it hard to believe that 85% of the people who applied for financing had bad to fair credit.


RE: Credit problems?
By iNGEN on 5/19/2007 2:55:48 PM , Rating: 2
According to Fair Isaac Corporation less than 4% of people with a credit score have an index over 720. It's pretty plausible only 15% of people who applied had good enough credit.


Annoyed with syntax
By BionicBigfoot on 5/17/2007 4:14:47 PM , Rating: 2
I am fairly new to this web site. One thing that irritates me is that a lot of stories on Dailytech are so out-of-whack in what I would consider even 6th grade english. This article alone has a spelling error in a quotation of all things! Not to mention on one line Pearson is spelled correctly but on the next it is spelled Perason. I guess as a person in the field that does programming from time to time I must be sensitive to syntax.




RE: Annoyed with syntax
By Mitch101 on 5/17/2007 4:32:48 PM , Rating: 5
I kind of expect mis-spelled words from technical people.

Im also a programmer which means I have been using broken english to name things for years. As long as the point comes accross I could care less if a word gets mis-spelled.

After all most of us dont sleep and work crazy hours. What sounds good when we write it doesnt sound as good the next day once weve had that morning cup of coffee.

Were geeks. Its pretty common that geeks do not have elevated levels of verbal proficiency.


RE: Annoyed with syntax
By Mitch101 on 5/17/2007 4:33:50 PM , Rating: 1
Also his name is Tuan Nguyen. Korean? English is probably his second language. If so he is doing better than me.


RE: Annoyed with syntax
By borismkv on 5/17/2007 5:51:07 PM , Rating: 4
Vietnamese, actually. At any rate, I'm not exactly a fan of seeing this many spelling and punctuation errors in reporting. I've done a lot of work as a copy-editor, and it kind of grates on me. I'm a techie, too, but that shouldn't be an excuse for the lack of journalistic professionalism. All serious publications should have a desire to be accurate in spelling. I mean, if you can't even take the time to spell something properly, why should I trust that you've taken the effort to properly research the subject of an article?


RE: Annoyed with syntax
By Tuan Nguyen on 5/17/2007 7:11:21 PM , Rating: 6
The great thing about DailyTech is that we allow users to make comments directly to our articles. That being said, skimming through sites like Reuters and others, many spelling errors can be found -- the drawback there is no one can say anything about it.

We're working hard at our content here at DailyTech, but unfortunately at times errors do slip through, even with editors. Certain errors at times are difficult to catch. Either way, everyone's human and mistakes do slip through.

At the end of the day, we do deliver the news the way it was intended and readers are informed about what's going on with the industry, the companies that they're fans of and the products they are looking to buy.

/ Tuan


RE: Annoyed with syntax
By encryptkeeper on 5/18/2007 11:31:10 AM , Rating: 1
To the guy who started this thread, this is a BLOG, not an official newspaper. If you can't read 1337, then get out of here. ZOMG PWNED! Ok, sorry, I never do that but I couldn't resist...


RE: Annoyed with syntax
By doctor sam adams on 5/20/2007 1:05:27 PM , Rating: 3
The volume of articles seems low enough that if you had one person to check everything who knew what he was doing and paid attention, that would take care of most of the errors that slip through.


RE: Annoyed with syntax
By Axbattler on 5/17/2007 6:42:56 PM , Rating: 1
The name sounds Vietnamese to me.

It depends to what you see the Daily Tech as. The site's presentation professional looking, at least compared to the average blog. But in terms of content, I see it as more of a blog with several owners than a news site: it's mostly a portal to news elsewhere packed conveniently into one place. Not that it's a bad thing. I can accept spelling mistakes for the conveniency, but I do think that they could use some editors if they want a more professional image.


RE: Annoyed with syntax
By Dactyl on 5/17/2007 5:31:34 PM , Rating: 3
You should ask for a refund.


RE: Annoyed with syntax
By sc3252 on 5/17/2007 5:46:27 PM , Rating: 2
I would agree with you if I was reading the new yorker. Of course I think you would agree this is a technical website about computers and not about poetry, and or the importance of the English language(not that it isnt imporant). All those things are important, but I don't make a fuss about it on a website directed to more of a technical audience.

People need to remember that websites that post news as fast as they see it(dailytech) will be making error a common occurrence. If you cant stand the errror, you have two options deal with it or go to another website. Its your choice.


I have heard of other problems...
By Turellius on 5/17/2007 5:35:48 PM , Rating: 3
Such as people getting sent two computers, being charged for two when they only ordered one. When they contact Dell to return the other one, unopened mind you, Dell refuses to take it. I have also heard of several people complaining about the "hidden" interest rates that were publicized here. I have a fairly reliable source. I know someone who worked for a company that dealt with debt collection on Dell credit cards. This person told me some of these stories and said that they would never purchase a computer from Dell knowing what they know about the company.




RE: I have heard of other problems...
By Sazar on 5/18/2007 10:34:20 AM , Rating: 2
I am sorry but your friend is mistaken at worst and grossly exagerating at best.

Dell has legal obligations and has full disclosure on it's website and all legal documents. I have purchased several items on my Dell Preferred Account (amusing name but its whatever) and have never had an issue. The terms and conditions are listed more clearly than they were on my Best Buy account (THAT is the one that should be getting sued) especially the interest free durations.

If people cannot take the time to fulfill their obligations and incur late fees, this is not the fault of the company but the consumer. There is also a grace period before a single bill has to be paid and it is actually not that hard to get the highest level on their scale. You simply have to have decent credit.

This is not a cell phone company where people with 500 credit scores can get a phone. Nor is it a car dealership where no credit can get you a car due to whatever sort of crazy relationships with shady banks they may have.

Further, Dell should not be refusing to accept a return. That's just boneheaded. They have a good returns department, I have had 0 issues in setting up returns within the appropriate time frame. Beyond that, I've only had 1 issue and I spoke to a case manager and had everything resolved over the course of 3 emails. No pain there.


RE: I have heard of other problems...
By Rugar on 5/18/2007 5:55:37 PM , Rating: 2
+1 to what Sazar said. Deferred interest loans are called that for a reason. Meet your obligation to pay on time or you will get hammered with some serious deferred interest.

It's all right there in that little packet Dell mails you when you open a Dell Preferred Account.


Magic Trick?
By df96817 on 5/17/2007 7:12:47 PM , Rating: 5
"Now look closely everybody, inside this box is customer service. Watch me make it disappear."




By encryptkeeper on 5/18/2007 11:33:49 AM , Rating: 2
I work for a channel partner, so screw Dell. I never liked their products before I started working here either. This is perfectly fine news to me. If they can prove in numbers that Dell offers but never means to give the no interest financing to customers, then it's pretty much an easy case. But that probably won't be easy to prove.




By Sazar on 5/22/2007 6:04:41 PM , Rating: 2
Prove how?

There are millions of people who use the consumer channel at Dell and a large number who finance. Sure, there are going to be a lot of people who don't qualify but how is this different than people not qualifying for various other 0% offers?

This does not make a case, regardless of your personal bias.

From my personal experiences, I don't even know what tax-payer's money is being wasted on such an idiotic case.


credit rating
By johnsonx on 5/17/2007 3:47:52 PM , Rating: 3
quote:
"Why did I not qualify for promotional financing?" asked Reisner. "I own my own home, always pay my bills on time."


That doesn't mean he has a high credit rating. When he says "I own my own home", what that probably means is he has a mortgage. He probably also has other debts, and his credit score is probably high 600's/low 700's. Not a bad score, but not enough to be considered truly 'well qualified', particularly if his income isn't substantially higher than his monthly expenses.

What I wonder though is if this 'zero percent financing' was truly 0%, or just deferred interest financing. The former usually does require a very high credit score, while the later is usually given to just about anyone in the hopes that they won't be able to pay it off in time and will then accrue all the interest at 20%+.




Some problems with this
By killerroach on 5/17/2007 4:21:13 PM , Rating: 3
This seems more like something that doesn't really need the attention of the NY AG, were it not for the fact that this sort of case creates headlines. Former AG (and current Governor) Spitzer did this to a large extent, and it looks like his successor (Andrew Cuomo) is picking up where he left off. Definitely is a lot more glamorous to sue a massive corporation from Texas over contract terms than to engage in other legal actions in the state, that's for sure. It's probably a viable case, but the AG's involvement seems more like politics than anything.

As former NY Governor Pataki said: "You all know what AG stands for - Aspiring Governor."




Clear to me
By noirsoft on 5/17/2007 9:35:45 PM , Rating: 3
I bought an XPS laptop on the 18 month "no interest" plan, and it was made very clear to me that it was a "no interest if you pay off the balance in 18 months, otherwise you pay all the interest" -- Now, I'm also smart enough to have asked the salesman before buying.

In fact, every bill I get says in big all-caps

quote:

PLEASE NOTE: TO AVOID FINANCE CHARGES, PAY THE NEW PLAN BALANCE BY THE PROMOTION EXPIRATION DATE


While there may very well be some shady salesmen out there lying to customers, I bet many of these people claiming fraud never actually read their contracts before signing them.




Good.
By trax on 5/18/2007 12:18:22 AM , Rating: 2
I'm glad to see these crooks get slapped around a bit after the experience I had when I decided to order a new laptop back in January. I'm especially pleased that it's happening in my home state.

I didn't qualify for Dell's "interest-free" line of credit. I'd love to know what one actually has to do to qualify for this mythical interest-free credit, because my credit score is outstanding - but that's just a minor annoyance compared to what I went through to cancel the unwanted line of credit for which I *was* approved, the one that offered the low, low rate of 22.74% APR. (Yeah, can't imagine why I didn't want to keep that line of credit - what a deal.) It took three phone calls to finally get this done, including one with a liar who assured me that the account would never be activated because I didn't make a purchase. (The card arrived in the mail a couple days after that conversation.)

Then they refused to send me confirmation that the account was closed because I didn't accept the terms and conditions. So.... you won't tell me you've closed an account unless I accept the terms, which would in fact mean I want the account open. Um, OK. My brain still hurts over that one. Anyway, once I started using initials such as "BBB" I got the confirmation letter I was looking for.

Buy a Dell if you must, but stay far, far away from their credit department unless you consider sanity to be overrated. Dell lost my business with this BS.

Oh, and I still don't have a new laptop.




Looking deceitful
By splint on 5/18/2007 12:14:50 PM , Rating: 2
Who picks these article images? They are consistently very good. Keep it up.




Proprietary - Yuck
By christojojo on 5/18/2007 2:36:22 PM , Rating: 2
Proprietary, I do the service work for my entire family, in-laws etc. I recommended these computers when they were fresh young and had customer service. It doesn't exist anymore. Dell the brand I recommended doesn't exist anymore. Cheaper parts, proprietary unreliable power supplies. I cant recommend them anymore. 10 Dells were sold by recommendation, now 7 Non Dells were bought by my recommendation and 2 home builts.




next lawsuit Verizon...
By bkiserx7 on 5/17/2007 10:37:34 PM , Rating: 1
...for there non-aforementioned limit on unlimited EVDO access. Sorrie fro ne syntacks errours




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