New York court finds Dell guilty of fraud

Company convicted of false advertising, deceptive business practices and abusive debt-collection practices

Dell Inc. was found guilty of fraud, false advertising, deceptive business practices and abusive debt-collection practices in a case brought by the New York attorney general.

The Albany County Supreme Court yesterday found that Dell deprived customers of technical support that they bought or were eligible for under warranty in several ways. Among those practices cited were requiring people to wait for long times on the phone, repeatedly transferring their calls and frequently disconnecting their calls.

Dell also often failed to provide on-site repairs for customers who bought contracts for such support and often blamed software when hardware was the problem, the court found. The company also sometimes refused to offer support when a support contract ended, even though the user had first complained about a problem before the end of the contract. Subscribers to a "next-day" repair service sometimes waited as long as a year for support, the court found.

Dell and affiliate Dell Financial Services LP also advertised special no-interest financing but denied those terms to almost everyone. It often sold customers products without informing them that they didn't qualify for the special financing terms and then charged them interest rates as high as 30%, the court said.

Dell and Dell Financial Services also often incorrectly billed customers for canceled orders and for accounts they didn't authorize. The companies then harassed the people for payment, using illegal billing and collection practices, the court said.

The court will determine how much Dell will have to pay in restitution to affected customers and will also require the company to pay the state of New York the profits it made on these deceptive practices. The ruling also prohibits Dell and Dell Financial Services from continuing to engage in the fraudulent activities.

The court laid out plans for investigating how many people have been affected as a way to determine restitution. Dell said it hopes the court will find that only a few people had bad experiences. "We're confident that when the proceedings are completed, the court will determine that only a relatively small number of customers have been affected," Dell said in a statement. "We believe that our customer service levels are at or above industry standards."

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