Lawsuit Highlights Complaints of Angry Dell Customers

Laurie Earhart, of Waynesboro, Pennsylvania, takes good care of her credit rating. So she wasn't surprised when Dell offered her zero-percent financing on the $1063 Dell 1500 Inspiron laptop she was planning to buy.

"The salesman and the Web site stated, 'pay no interest for 12 months'," says Earhart. With no interest to worry about, she recalls, spreading payments over 12 months would have had little impact on her family's tight budget. She took advantage of the offer, and she says the Dell laptop was everything she could have hoped for. But soon, Earhart's honeymoon with Dell ended.

In January 2007, Earhart received her third monthly statement from Dell and was shocked to see $162 in finance charges. The company had applied a 12 percent interest rate to what she still owed on the notebook.

When she called to notify Dell of what she was sure must have been an error, the representative told her it was no blunder. The company now believed Earhart's credit rating to be insufficient, according to the rep. "I told them I had excellent credit and it must be a mistake," Earhart says. But, she adds, the rep insisted she would have to pay the higher interest rate.

Earhart was steaming mad. She paid off the entire laptop to avoid further finance charges and complained to the Better Business Bureau in Texas, where Dell is located.

With the help of the BBB, Earhart later received a refund from Dell on all financing charges.

Lawsuit Targets Dell Customer Beefs

Earhart wasn't the only customer to see a promised zero-percent interest rate jump overnight.

Casey Henry of New York City saw the interest rate on her $1150 Dell desktop leap from zero to 27 percent. When she complained, the company offered her $200, but refused to reduce her interest rate. Henry declined the $200 and returned the PC she'd bought months earlier. With the help of the BBB, she received a full refund from Dell.

Last month, New York Attorney General Andrew Cuomo filed a suit (PDF file) against Dell and its financing arm, Dell Financial Services, alleging fraud and false advertising. The suit, filed May 14 in Albany County Supreme Court, alleges that, in addition to raising interest rates, Dell repeatedly failed to provide timely on-site repair to consumers who purchased "on-site" service contracts. It also charges Dell with perpetuating numerous other deceptive business practices, such as failing to make good on rebate offers.

In many of the complaints to Cuomo's office and to the BBB and in PC World's interviews with unhappy Dell customers, a similar story emerges: When people asked Dell what happened to their promised zero-percent financing, the company offered no initial apology, claiming either that the low interest rate given to them was a mistake or that the low rate was available only for a few months--not for the year or longer some customers say they were promised.

Dell Denies Charges

Dell and DFS deny the charges in the lawsuit. "Our customers remain our top priority at Dell. We will vigorously defend ourselves in court," a company statement says. "We are confident that our practices will be found to be fair and appropriate. While even one dissatisfied customer is too many, the allegations in the AG's filing are based upon a small fraction of Dell's consumer transactions in New York. We are committed to providing a positive experience to all of our customers every day."

Dell and DFS refused requests for an interview, but pointed out that complaints sent to the BBB by New York consumers were down 28 percent in 2006 compared to the year before. And all U.S. complaints about Dell to the BBB declined 12 percent over the same period. The figures were confirmed by the Texas BBB.

A drop in Dell PC sales may have accounted for at least part of the drop in complaints. According to data from market research firm, IDC, U.S. sales of Dell computers dropped 12 percent from 2005 to 2006.

Currently, Dell and DFS's status with the BBB is in limbo as the BBB updates Dell's records to reflect the New York lawsuit against them. However, the company remains a BBB member and has responded to every complaint brought to it by the BBB on behalf of consumers.

DFS is not a member, but it still has answered all of its complaints, says Karrie Hurt, president and CEO of the Central and South Central Texas BBB.

On-Site No Shows

Charlie Smith of Fairport, New York, says he's so fed up with his experience with Dell that his next computer will be a Mac. In February 2006, he bought a Dell desktop and paid an extra $171 for a warranty that included "at home services" for his desktop.

"I was told that this warranty would cover everything and anything that might go wrong with the PC," Smith says. Within weeks, the PC started having intermittent trouble recognizing the USB ports and both the CD and DVD drives.

Smith says within a month he clocked nearly 12 hours on the phone with calls to Dell tech support. When he finally insisted that a tech come out to his home and fix his PC, a Dell rep told him that Dell wouldn't be able to fix the problem because it was a software issue. Worse, Smith says he was told that if he wanted any more help to fix the problem, he would have to pay an additional $100 for a warranty that covered software issues.

Smith was livid. He refused to buy the extra software warranty and shot a letter to Dell, with a copy to Cuomo's office. After coaxing from the New York Attorney General's office, Dell sent a technician to Smith's house, Smith says. He says the technician admitted the PC had a hardware problem. Ultimately, Dell replaced the entire system four months after Smith purchased the PC.

Why Dell?

As infuriating as these stories sound, though, some analysts and even consumer advocates say they are surprised by Cuomo's suit. They say Dell has taken steps to improve the service it offers and has been fairly responsive to consumer complaints.

"The suggestion that Dell set out to intentionally deceive consumers, as the lawsuit contends, does not ring true with the reality that Dell has been in the process of adding resources to its services capability," wrote Goldman Sachs stock analyst Laura Conigliaro in a research note to clients.

"We are a bit surprised to see the lawsuit," says the BBB's Hurt. She says DFS has significantly reduced the number of days it takes to resolve complaints brought by the BBB on the behalf of consumers.

In 2006, DFS took 19 days on average to resolve complaints brought to it by the BBB, compared with 28 days in 2005. Dell, on the other hand, slipped in the time it takes to resolve a complaint: This time increased to 25 days in 2006 from 23 days in 2005. However, the average time it takes any company to resolve a complaint is 25 days, Hurt says.

Representatives at the New York Attorney General's office say the fundamental merits of the case are based on systemic problems that New York consumers are having with Dell and DFS and not on how quickly the companies respond to complaints.

The lawsuit also alleges that DFS incorrectly billed consumers for cancelled or returned orders. And it claims that Dell used defective refurbished parts or computers to repair or replace consumers' equipment.

According to the attorney general's office, it has received hundreds complaints about Dell since it filed the lawsuit. New York consumers who wish to file complaints against Dell or Dell Financial Services should contact the attorney general's Consumer Help Line at (800) 771-7755 or visit a dedicated Web site set up to accept complaints at www.NYAGDell.com.

Another option for Dell customers is to work with the Texas BBB. Hurt notes, however, that the BBB can't promise the resolution it works out with any company will fully satisfy the consumer involved.