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New York Supreme Court cracks down on company’s deceptive business practices

Dell committed consumer fraud, said a New York state supreme court on Tuesday, by luring customers in with no-interest loans, and sticking them with high interest loans instead – sometimes at interest rates higher than 20%.

Dell’s actions were a “bait and switch that left thousands of people paying for essentially no service at all” said New York attorney general Andrew M. Cuomo. “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,” he said.

N.Y. State Supreme Court Justice Joseph C. Teresi found that Dell and its division, Dell Financial Services – which is a joint venture between Dell and CIT Bank – committed a litany of wrongs: fraud, false advertising, as well as abusive debt collection and deceptive business practices. Court findings indicate that Dell used no-interest and no-payment financing offers to entice customers to purchase a computer, and then denied the majority of loan applications, sticking customers with a high-interest loan instead. Further, Dell frequently billed customers for purchases on unauthorized accounts, cancelled orders, or returned products – and then harassed the same customers with abusive collection practices.

A Dell representative, speaking in an e-mailed statement to InformationWeek, said that the company is undecided on whether or not it will attempt to appeal the ruling. Dell, however, feels that only a few customers were affected; when the dust eventually settles, the company said that it is confident that the courts would soften their stance.

“We don't agree with this decision and will be defending our position vigorously,” said the representative. “Our goal has been, and continues to be, to provide the best customer experience possible.”

Commenters on the InformationWeek article reported being hit with interest rates as high as 30 percent.

Dell, which recently has been attempting to rebuild its company image in light of losing title of largest computer manufacturer to Hewlett-Packard, claims to have placed a special emphasis on rebuilding its fallen customer service reputation. The New York state ruling will likely be another black eye for company founder Michael Dell, who recently returned as Dell’s CEO after a three-year hiatus. Direct2Dell, the company’s official blog about its products and services, so far remains silent with regards to the ruling.

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By shortylickens on 5/28/2008 7:11:04 PM , Rating: 5
+1 for the little guy!

By just4U on 5/28/2008 7:20:46 PM , Rating: 5
Dell needs to get back to the basics. In the early 90s they were a wake up call to other OEM's as Quality,Customer satisfaction, and support were key to their eventual growth.

These days they are anything but on all 3 counts.

By someguy123 on 5/28/2008 7:45:09 PM , Rating: 2
i don't remember dell ever being high quality nor having good support, but they were cheaper than other manufacturers which made them a better deal.

By just4U on 5/28/2008 7:53:14 PM , Rating: 5
It was in and around 94-96 when they were winning a ton of awards. There machines were closer to a custom type build with higher quality parts/options then what you'd see from other OEM's.

There customer service was supposedly a cut above what to expect as well. At the time machines like that were far to pricey for me but I remember reading alot on them and wishing I could afford one.

By just4U on 5/28/2008 7:54:00 PM , Rating: 3
EEEK Spelling police... there should be their! ;)

By das mod on 5/28/2008 8:24:56 PM , Rating: 3
is funny how your post got voted down for pointing out your own typos

... just goes to show how avid
daily tech readers are

By BarkHumbug on 5/29/2008 4:56:08 AM , Rating: 4
... just goes to show how avid daily tech readers are

I have points to spend! If I don't find something I like, I'll sure find something I dislike! </sarcasm> ;)

By AlexWade on 5/28/2008 9:51:17 PM , Rating: 3
Dell's main problem earlier this decade was Dell was telling customers what they wanted instead of giving customers what they wanted. Remember, this is the same Dell that said there was no demand for AMD while other OEM builders couldn't keep the AMD products in stock. The same Dell that wouldn't sell AMD until Intel had a better part. (I'm not saying ... I'm just saying.)

HP became #1 for OEM computers because HP did this. HP dumped Itanium, even though they helped Intel make it, because they saw customers would rather have Opteron. For a while I recommend HP for my customers because HP gave you a choice. I still do recommend HP over Dell or Sony or Apple because HP gives you a better choice.

Listing to what customers what is the basics of any business.

By oab on 5/28/2008 10:21:17 PM , Rating: 2
I still do recommend HP over Dell or Sony or Apple because HP gives you a better choice.

The choice to have a computer come pre-loaded with crapware, instead of giving you the option to not have it.

I will say however, that in Canada, out of all the times I've called HP support (which has been 20+) at least as of the last time I called them their support was still in Canada, whereas Dell had outsourced all of theirs at that point.

I still wouldn't BUY an HP however, if I was forced to purchase a major-brand pc, I'd probably pick Dell (I can provide my own tech support), and if I was recommending a PC for someone else to purchase (as long as they didn't play games), it would be Apple. Their support is the best of the worst, and their hardware is generally fairly reliable, if extremely limited in upgrades. Unless you're a real hardcore PC-nut/gamer, you wouldn't be doing any upgrades beyond RAM anyway (possibly HDD), as you don't/can't play graphically demanding games on Macs. Beyond the price premium you pay for the machines.

If someone else wanted a PC, I'd steer them to a Thinkpad/Thinkcentre. Minimal 3rd party crapware (though there is Norton, but at least it's Norton corporate bundled, which has an uninstaller that isn't broken). No idea what their phone support is like, but those are business series computers, so it's got to be better than HP/Dell "consumer" level stuff. Right?

By rob8129 on 5/28/2008 10:42:14 PM , Rating: 3
"I still do recommend HP over Dell or Sony or Apple because HP gives you a better choice"

We used to be an HP exclusive shop until they started screwing up drastically on the product as well as the service on the PC side. We had orders messed up on numbers as well as having the wrong items shipped to us. One time we even had 10 servers shipped to us without ANY hard drives even though they were on the PO as to be factory installed. It got so bad that we let Dell in the door with a 100+ PC order and I have to say at 3 years later we are now buying mostly Dell rather than HP (I would have shifted all of our PC purchases to Dell but my boss does not want to put all of our eggs in one basket).

Anyway, even when we have an issue with the Dell PCs we have customer reps who we can contact directly who either take charge of the issue or forward us to high level technical support engineers who work with us to resolve the issue. We also have all of our techs Dell certified on all the models we have so that if we need a part, all we do is call up and have it shipped overnight. For professional support, IMHO, they can't be beat. HP doesn't offer us anywhere near the support for the models that we still order from them.

At home, I have helped over a dozen family and friends buy Dell PCs over the last 5 years, and you know what, I don't even know the Dell support number, never had to call on all those PCs. My sister just got a hell of a deal on a Vostro laptop and it came without any crapware, just shocked me when I saw it.

I know this sounds like a fanboy Dell post, but I only call them like I see them, and Dell has been a great company with great products from my experience. HP has gotten better with their products, but the customer support still needs to play catch up.

By Ochophosphate on 5/29/2008 11:35:03 AM , Rating: 3
This doesn't surprise me. Dell's business support far outshines their consumer support. You have to figure they're going to really take care of their bread and butter.

By techone on 5/28/2008 7:53:54 PM , Rating: 2
People that have worked for Dell Call Centers can vouch on this is that a vast majority of credit applications I did for people while working with Dell were declined. I used to take upwards to 30+ calls a day and run at least half of them. I felt bad reading that script but I know I had most of it memorized by the time I turned in my badge.
On the flip side as a consumer - My wife got an account with Dell to purchase a laptop PC for herself to use while she went to school. Recently I saw the interest come down on the's amazing.
I'm going to pay that sucker off but not going to be happy! :P

By irusun on 5/28/2008 9:31:52 PM , Rating: 2
On a phone order at work a year or so ago, I was asked by the Dell associate if I wanted to pay by credit card or they could just send an "invoice". I figured it would be faster to just have our book-keeper deal with an invoice than for me to get out the credit card and start reading a bunch of info over the phone.

Big mistake! The "invoice" we received was actually a whole credit application thing that ended up being one giant waste of time. The Dell guy was extremely misleading.

By The Irish Patient on 5/29/2008 4:19:50 PM , Rating: 2
I've used Dell credit to buy several computers for the small office I work in. I've never had any problems. All of the sales people I've spoken with were always careful to explain the potential downside of the transaction.

You buy on an invoice with nothing down. Pay within 60 days and there isn't any interest. On the 61st day, the arrangement converts to a loan with exorbitant interest. The associates were always blunt about this. They always said that the deal was no good if I needed more than 60 days to pay in full. They always advised me to pay before the 60 days were up or find some other way to finance.

I have to think that other Dell customers were given the same script.

The point is that my employer generally doesn't buy new computers until it absolutely has to. Then we need a replacement ASAP. This arrangement plus pay off to Dell on a credit card provides 90 days interest free. The employer could just pay cash at the outset but this helps with the cash flow.

My guess is that the people claiming to have been burned by Dell are the same ones claiming to have been burned by the mortgage industry.

By ElFenix on 5/29/2008 4:54:53 PM , Rating: 2
no kidding. the way they set up the system you'd talk someone into buying a computer then run their credit and you'd get the script for the 28% rate with a $1500 max. by that time you and them had been on the phone for half an hour and people just accepted it. even the best offers were really crappy.

though, i don't agree it's a bait and switch. since when did people with crappy credit have a reasonable expectation of getting a 0% rate for 6 months? it's not like that offer wasn't available for people with good credit (i qualified myself for it, though never bothered using it).

i'm glad i worked in s&p rather than superqueue. most people weren't buying toner on credit.

Good for them...
By Cheapshot on 5/28/2008 10:56:06 PM , Rating: 2
Now if we can just get those NY lawyers to go to work on car salesman and thier Finance officers...

Don't mind me... I just paid $24,000 for my $18,000 car. 8 hours of car shopping then 3 hours of Negotiations plus an hour with the bank guy... 10pm rolls around and you just want to leave, then BAM they nail ya with the teeter-toter price scheme.

how come noone is going after them?

RE: Good for them...
By theapparition on 5/29/2008 8:52:09 AM , Rating: 2
Maybe because your a complete moron if you paid 6k too much. Walk out and leave, your under no obligation.

I've had those 10pm deals too. (actually more like 12!)
End result.......I walked out with more money in my pocket. A car salesman works for you, unless your dumb enough to let him control the deal.

I'm tired of all these people who claim they were ripped off. The idiots taking ARM mortgages with balloon payments have no-one to blame but themselves. It's one thing when terms are switched, fine print that's illegal, or other nefarious methods are used to defraud, like in this case. But you'll find the majority of people who cry are people who shouldn't have purchased in the first place and just overspent our of thier means. Maybe I could be a better person and feel some sympathy, but I'm not and I don't.

RE: Good for them...
By xti on 5/29/2008 4:36:25 PM , Rating: 2
holy that time of the month batman

RE: Good for them...
By Foxbat121 on 5/29/2008 9:35:07 AM , Rating: 2
In most states, you have 3 days to back out of a car purchase. No reasons needed. If it took more than 3 days to figure out you got ripped off, you truely deserve it for being dumb.

Not surprised.
By Muerr on 5/29/2008 1:22:50 AM , Rating: 2
This is typical. Sears, for example started making more money through Discover card (did you know Discover was a Sears product?) than they did through the stuff they sell/sold.

More and more companies that sell stuff don't actually make much, money on the sale of the stuff. They make heaping PILES of money on imaginary goods: finance paper. That is, leases, loans and other financing plans, insurance policies, warranties, etc.

If you don't borrow money, you don't need to worry about getting ripped off on loans. If you know that most warranties are 99% USELESS ripoffs, you don't buy them and you stop getting ripped off on those too.

This isn't rocket science. Unfortunately Americans are so stuff driven and so microwave obsessed they can't have a tiny bit of patience. They need that new Dell computer RIGHT NOW with a 90 days same as cash loan or 12 months no interest, etc. They are scared that their kid will break it so they get extended warranties. And then they wonder why they're broke.

Consumerism is a nasty disease. I'm as guilty as anyone else, but I at least research my purchases, PAY CASH, and say no thank you when Best Buy wants to sell me the extended warranty on Call of Duty.

RE: Not surprised.
By Spivonious on 5/29/2008 9:34:40 AM , Rating: 2
Discover Card is one of the four major credit card brands issued primarily in the United States. The Discover Card was originally introduced by Sears in 1985, and was part of Dean Witter, and then Morgan Stanley, until 2007, when Discover Financial Services became an independent company.

RE: Not surprised.
By evalese on 5/29/2008 1:27:03 PM , Rating: 2
If you really want to make out well, you don't pay cash. You make sure you have the money already, and then you pay with a credit card that gives you points. Then you get free stuff. For instance, a free ps2, ps3 and digital camera off of a sony card (so far). Don't avoid the warranty on high priced items, either. A 4 year warranty on a tv at Best Buy saved me 3 1/2 years in when it decided to die (as DLPs love to do). Got a new $4000 tv for $300 over the cost of the original tv plus the $250 I paid for the extended warranty.

By b2386 on 5/28/2008 11:13:41 PM , Rating: 2
Speaking of Dell, weren't they supposed to be closing all their kiosks sometime? I have been awaiting the day of no more sales tax but have yet to see it...

If it was any other state
By Reclaimer77 on 5/28/08, Rating: -1
RE: If it was any other state
By kjboughton on 5/28/2008 8:18:30 PM , Rating: 2
I heard about this, the "great" state of NY apparently decided to suddenly enact a law which required any company which ships purchased consumer products in the state to also collect state sales tax.

Seriously, this is extortion - demanding that someone collect money on your behalf in order to mail products in your state. A new tax has got to be this state's answer to everything.

For all of you that still live in NY, let me give you some advice. Get out! Of course, I live in CA so I don't have a leg to stand on. I do, however, plan on leaving when the right opportunity comes along. I can't deal with this oppressive state.

RE: If it was any other state
By Polynikes on 5/28/2008 9:32:20 PM , Rating: 2
Don't worry, I'm getting the heck out as soon as I graduate from school.

RE: If it was any other state
By oab on 5/28/2008 10:30:00 PM , Rating: 2
Seriously, this is extortion - demanding that someone collect money on your behalf in order to mail products in your state. A new tax has got to be this state's answer to everything.

It's not extortion, it's a sales tax that says that if you buy a product in a state with a sales tax, that you would need to pay state-sales tax on that purchase, even if the company does not have a store there. It's also not a new tax, it's an expansion of the companies that need to collect taxes on the state's behalf to the internet, instead of B&M stores.

Having said that all however, it's just crap that they are trying to make that actually happen. Fortunately I don't live in NY (Ontario), and I would only need to pay PST on products shipped online from companies where the company is headquartered (ie: no PST on online orders from NCIX, but yes to PST on online orders from CanadaComputers), as one is in BC, and the other in Ontario. However if I lived in BC, I would be the opposite.

Amazon was of course able to get out of the sales tax argument (Texas is making the same one iirc now) by saying that because they had no distribution centre in NY, they didn't need to pay NY sales tax, but Amazon does have on in Texas, so the real test of that internet tax situation will depend on how Texas vs. Amazon goes (assuming it is in fact Texas that has brought the suit).

The best way to avoid state-specific taxes is to order from foreign companies :P, you can apply for a tax refund for purchases over $$$$ in that case (assuming it is not done automatically) for you.

RE: If it was any other state
By kjboughton on 5/29/2008 12:51:28 AM , Rating: 3
Do you work for the IRS? Or do you just enjoy arguing the side of the government? Maybe if you knew what incredible BS this "tax" money was being "used" for you wouldn't be so happy to explain why NY (or any state for that matter) deserves to rob her citizen blind.

RE: If it was any other state
By Reclaimer77 on 5/28/2008 10:52:49 PM , Rating: 1
Also I believe NY was the state that allowed a bunch of fat people to sue McDonalds, saying it was the franchises fault they got fat. As if Ronald McDonald put a gun to their head or something and made them pork up! I'm not 100% sure about that though.

And a -1 rating ? Mrs. Clinton must be a DT reader ! *ducks*

RE: If it was any other state
By amanojaku on 5/28/2008 11:09:10 PM , Rating: 1
So in my best Bronx accent, I say to Dell, fawgeet abought it !

The Bronx? Clearly, you aren't a New Yorker. :-) That's BROOKLYN , and it's " fugheddaboudit! "

Funny you should mention the tax: I just got mail from Newegg.


Important Message to Our New York Customers
May 23, 2008

Dear Valued Newegg Customer,

As a result of recent changes in the State of New York Tax Law requiring certain out-of-state retailers to collect and remit sales taxes to the State of New York, we regrettably inform you that must begin collecting applicable state and local sales tax for all orders shipped to New York addresses on or after June 1, 2008.

Qualified business customers can continue to use the Sales Tax Exempt Form.

We value our relationship with you and all of our New York customers. We apologize for any inconvenience caused by this change in New York law and assure you that we will continue to work hard to offer you the best prices, fastest shipping and award winning customer service you deserve.

We look forward to continuing to provide you with the premier online shopping experience for all of your IT and Consumer Electronics needs.


Bernard Luthi
Company Spokesperson and
Vice President of Merchandising

To me this is extortion. There is no longer any benefit to buying outside of the state unless you factor in better service and/or lower prices, including the tax. The thing is, many of my purchases are bought out of state by necessity: few stores (brick and mortar or online) carry things like AMD CPUs or APC batteries. This is just a way for my state to collect money without actually having to do anything. It's bad enough that NYC sales taxes are higher than the rest of the state's; we pay federal, state, AND city taxes by April 15th, too.

RE: If it was any other state
By kjboughton on 5/29/2008 1:05:59 AM , Rating: 2
This is just a way for my state to collect money without actually having to do anything.

Uhh, when does the state EVER do anything to justify collecting tax money?

Think about it, the government is in a unique position to do absolutely NOTHING and still get paid to do nothing at all. Do you think the goverment is any more involved in an in-state transaction as opposed to one that originates outside of the state? Answer: NO, it both cases it's, get this, NOT AT ALL.

Seriously, companies have entire departments that do nothing more than handle the enormous burden that comes with collecting, documenting, balancing and verifying the taxes that the local/state/federal governments demand we pay (or else you go to jail) are properly managed before being just handed over. Not only do you pay the taxes - because hey, the company that sold you their product just rolls that costs on to you - but you also paid more so that the same company can afford to employ bean-counters for just this purpose (collecting taxes).

Not unlike "protection" provided as long as you paid-off the local tough guy. Of course, if one man does it, that's extortion. If the government does it, and abuses the privilege of the people, well, that's just taxes...

RE: If it was any other state
By amanojaku on 5/29/2008 8:54:24 AM , Rating: 2
Sales tax is paid to the state in which goods are purchased IF the purchaser resides in that state. As a result, the state now has the funds to pass laws and enact programs that affect the state. If I live in NY and buy products or services from a business in CA, how is my tax money benefiting CA if it's being paid to NY?

Technically, what NY enacted is a USE TAX . This is why I'm angry: laws are extremely strict, even when it comes to wording. Calling this a sales tax is legally incorrect according to the Constitution, yet this seems to slip by. I call it ABUSE TAX .

RE: If it was any other state
By rocketcuse on 5/29/2008 8:51:52 AM , Rating: 2
If your state collects sales taxes, such as NY, then any defined taxable item(s) you purchase IN or OUT of state is taxable.

If you did not pay a state sales tax for you online purchase, by law you are suppose to claim that purchase on your tax forms. Should you purchase an item out of state and did not pay sales tax, same thing, you are suppose to by law claim that on your tax form. If your purchase a taxable item out of state and paid that states sales tax, and your state residence sales tax is higher, again, by law you are suppose to claim the difference on your tax forms.

Most states such as NY and where I live now in KY use the honor system.

So revolt! Let’s have a NY Tea Party!!! :) Boston had theirs. I would move back to NY just for this :)
Didn't we revolt agaisnt England because of high taxtions. Just a thought! :)

RE: If it was any other state
By Spivonious on 5/29/2008 9:45:21 AM , Rating: 2
We revolted from England because they were taxing us and we had no representation in the government. Anyone can run for the NY state legislature. If you don't like the sales tax, then run for a position in the next election, or contact your representative and let him know you don't like it. He/she represents you!

RE: If it was any other state
By Reclaimer77 on 5/29/2008 6:08:42 PM , Rating: 2
He/she represents you!

In theory yes. In practice, certainly not.

I doubt anyone in NY actually enjoys the high cost of living, oppressive sales and property tax rates, and other such legislation. And I SERIOUSLY doubt representatives got an outpouring from citizens to prosecute Internet sales.

"Can anyone tell me what MobileMe is supposed to do?... So why the f*** doesn't it do that?" -- Steve Jobs
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