New York State Finds Dell Guilty of Fraud

The New York State Supreme Court issued a ruling today against Dell and Dell Financial Services (DFS), finding the company guilty of "fraud, false advertising, deceptive business practices, and abusive debt collection practices." The ruling is the end result of a lawsuit filed by New York State Attorney General, Andrew M Cuomo, in May 2007. After the ruling, Cuomo issued a statement saying that Dell and DFS essentially used "a bait and switch that left thousands of people paying for essentially no service at all." He also said: 

"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."

Attorney General Andrew Cuomo - Press Conference

The specific practices that Dell was found guilty of are:

  • Charging customers 20 percent interest on what was advertised to be no-interest financing.
  • Billing customers for canceled orders and returned products, and then harassing the customers with "illegal billing and collection activity."
  • Failing to provide in-warranty service in a timely manner.
  • Failing to fulfill promised rebates.
The New York State Supreme Court has yet to rule on how much Dell must give back to its customers and now much Dell must pay New York State. After today's ruling, Dell issued a statement in response: "We don't agree with this decision and will be defending our position vigorously." Also in the statement, Dell speculated that the amounts it would ultimately owe would be small as only a "relatively small number of customers" were impacted by these practices.

This is not the first time the Empire State has tangled with online retailers. New York State's "Amazon Tax" was just signed into law by New York Governor David Paterson a few weeks ago. The law, which goes into effect June 1, requires that Amazon collect sales tax on all purchases made by customers who reside in New York State. The state's argument is essentially that since some of Amazon's affiliates are based in New York, then all purchases made on Amazon by New York State residents are subject to New York State sales tax. Amazon is not sitting idling by and letting this happen without a fight, however; Amazon has sued New York State, arguing that the new law is unconstitutional.

New York state makes a powerful statement when it successfully goes after predatory business practices of the likes of Dell--looking out for the best interests of the consumer. The "Amazon Tax," on the other hand, is New York State just looking out for the best interests of New York State.