Dell settles financing, rebate lawsuit with states

Dell Inc. said Monday that it had agreed to a legal settlement with states that said the computer company made misleading financing and service offers to PC buyers.

Dell will pay $3.85 million to California and at least 45 states participating in the settlement. A portion of the money will be used to reimburse states for legal costs.

Shares of Dell dropped 47 cents, or 4.2%, to $10.65.

Attorneys general from Connecticut and Washington approached Dell with their concerns in the middle of 2008. Connecticut Atty. Gen. Richard Blumenthal said that an “epidemic-like wave of complaints” about Dell’s practices prompted him to contact his counterparts across the country.

Blumenthal said consumers who were offered no-interest financing were later ambushed by high interest rates and fees. Some people “faced unacceptable obstacles obtaining warranty service on their Dell computers and others said they never received promised rebates,” he added.

Only one state, New York, has sued Dell over this issue. That case was filed in 2007, and in May, a New York state Supreme Court judge ruled against the computer company. Alex Detrick, a spokesman for the New York attorney general’s office, said the state and Dell were still wrangling over restitution and penalties.

Dell’s settlement Monday averted the possibility of a much larger lawsuit. Under the terms, Dell agreed to give customers more information upfront about what kind of financing they qualify for and to let them cancel orders once they review final credit terms.

Dell also agreed to mail rebate payments and fulfill warranty obligations within a reasonable amount of time.

The settlement requires Dell to tell customers whether they must trouble-shoot problems by phone before qualifying for in-person technical support at home. Dell must also justify claims about its service. For example, if it wants to use the term “award-winning,” it must have won a customer service award in the last 18 months.

Dell said the states’ issues “represented only a very small percentage of the tens of millions of Dell consumer transactions in the states.”