Dell settles state consumer protection claims

SAN FRANCISCO Mon Jan 12, 2009 2:20pm EST

Michael Dell, chairman of the board and chief executive officer of Dell, delivers a speech during Dell Platinum Advisory Council in Shanghai October 22, 2008. REUTERS/Nir Elias

Michael Dell, chairman of the board and chief executive officer of Dell, delivers a speech during Dell Platinum Advisory Council in Shanghai October 22, 2008.

Credit: Reuters/Nir Elias

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SAN FRANCISCO (Reuters) - Dell Inc DELL.O has agreed to pay $3.35 million in a 34-state settlement of allegations that the personal computer maker mislead consumers on financing, warranties and rebates.

State attorneys general said on Monday that Dell had engaged in "deceptive" financing promotions, promising zero-percent financing but charging them higher rates.

In addition, consumers said they failed to receive promised rebates and had trouble getting warranty service.

Under the agreement, Dell will pay $1.5 million into a restitution account. Consumers have 90 days to submit claims in their state.

Dell, the world's No. 2 PC maker, has also agreed to pay $1.85 million to the states to reimburse legal costs.

"More than the money, this agreement provides profoundly important business practice reforms," Connecticut Attorney General Richard Blumenthal said in a statement. "No more bait-and-switch financing -- offers touting zero-interest that become surprise high-interest charges or astounding late penalties."

Dell spokesman David Frink said the company was "pleased with the prompt and reasonable response from the state attorneys general."

"These episodes represent a very small percentage of the tens of millions of consumer transactions in these states during this period of time. Most were satisfactorily resolved prior to the attorneys general contacting us."

Shares of Round Rock, Texas-based Dell were down 63 cents, or 5.7 percent, to $10.49 in afternoon trading on Nasdaq.

(Reporting by Gabriel Madway; Editing by Tim Dobbyn)

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