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SEATTLE - Dell Inc. said Monday it has agreed to a legal settlement with states that claimed the computer company made misleading financing and service offers to PC buyers.
Dell will pay $3.85 million to at least 46 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 percent, to close at $10.65.
Attorneys general from Connecticut and Washington, representing a much larger group of states, approached Dell with their concerns in the middle of 2008. In an interview, Connecticut Attorney General 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 zero-percent 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 so far. That case was filed in 2007, and last 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 are 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 up front 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 troubleshoot problems by phone before qualifying for in-person technical support at home. Dell must also justify claims about its customer service. For example, if it wants to use the term "award-winning," it must have won a customer service award in the past 18 months.
In its statement, Dell said the states' issues "represented only a very small percentage of the tens of millions of Dell consumer transactions in the states."
Round Rock, Texas-based Dell also said it had addressed these problems with many customers directly.
People who bought a computer or service on or after April 1, 2005, and had a problem with a financing offer, rebate or service can file a claim within 90 days with their state attorney general.
The states covered by the settlement as of Monday afternoon are: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Jersey, New Mexico, North Carolina, North Dakota, Oregon, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Washington, West Virginia, Vermont, Virginia and Wisconsin.