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Dell Settles Class Action Over Financing Practices

"90 Days Same As Cash?" Not Always

October 27, 2006

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A federal court in Tacoma, Washington has given final approval to a settlement in a class action lawsuit against Dell and its financial affiliates, ending nearly three years of investigation, negotiation, and litigation.

The class action against Dell Inc., Dell Financial Services, L.P., and CIT Bank alleged that the defendants' practices caused consumers to incur excess finance charges and late fees.

"This settlement puts money back in the pockets of Dell customers and we are very pleased with this result," said Eric Chaffin of Seeger Weiss LLP, one of the lawyers representing consumers.

Under the terms of the settlement, the defendants will pay up to $17 million to settle claims by customers who bought computers and related services and products from Dell and financed their purchases with Dell Financial Services. Dell and Dell Financial Services have also agreed to modify some of their sales and financing practices.

"This settlement will provide substantial benefits to past, current, and future Dell customers," said Steven A. Skalet of Mehri & Skalet, one of the law firms representing the plaintiffs.

The agreement settled three pending class actions and one unfiled class action in which plaintiffs alleged that consumers were enticed into financing their purchases by promotional offers such as "90 Days Same as Cash" but were not informed when they were approved for credit lines that lacked such promotional features.

The actions also alleged that the defendants failed to adequately disclose the terms and conditions associated with the "Dell Preferred Account" lines of credit.

As a result, plaintiffs alleged that customers accrued unexpected interest and late charges. All three defendants deny that consumers were misled or that they engaged in any wrongdoing, but agreed to the settlement in order to avoid continued litigation.

Under the terms of the settlement, eligible class members may apply to receive a refund of 75.95% of the estimated interest paid during sixty days following the initial purchase. Class members who paid a late payment fee may receive a refund of 75.95% of the average late fee paid by class members.

Dell Financial Services will also make changes to the way it advertises its promotional financing offers and communicates with consumers who receive lines of credit.

"The financial settlement, as well as Dell's promise to change certain sales practices, is in Dell's customers' interests in the long run," said Jeffrey Friedman of Lerach Coughlin Stoia Geller Rudman & Robbins LLP.

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