Here’s a little story about a $2,000 computer that so far has cost $7,800 and ultimately could cost thousands more.
It’s a desktop by Alienware, a subsidiary of Dell Inc. Ashley Baxter of Floyd County bought it in 2010 after she saw an online promotion. Baxter financed the purchase through Dell Financial Services, a subsidiary of the computer hardware giant. She arranged the loan over the phone.
Baxter said a Dell Financial representative told her the interest rate would be 8% and that if she made $60 monthly payments, she’d pay off the computer in three years. She’s now into year 10 of that loan. She said Dell Financial never sent her a contract.
By February, Baxter had paid $7,807.42 to Dell Financial. At that point the company informed her she still owed $2,559.21 on the loan. Assuming Baxter paid it off, the total would amount to $10,366.63 for a $2,000 computer.
Instead, Baxter sued Dell Financial to cancel the remaining debt. She figures she’s paid enough.
Floyd County General District Court Judge Randal Duncan heard the case Thursday. He dismissed it. Baxter has 10 days to appeal to Floyd County Circuit Court. Baxter’s attorney, Jonathan Rogers, said she intends to.
Neither Dell Financial nor its attorney, Lori Thompson of Roanoke, responded to messages I left about the case. In a court filing responding to Baxter’s lawsuit, the company denied all her allegations.
Baxter’s complaint accused Dell Financial of violating the Virginia Consumer Protection Act.
Two to three years after Baxter bought the computer, she said, she and her husband began making repeated telephone inquiries with Dell Financial customer service about the loan and their payments.
“We would get a statement here and there, we would see the balance isn’t going down,” she told me. Baxter said she wasn’t sure how many phone calls the couple made to the company’s customer service department, but “I would say it was more than once a year,” she said.
In February, Dell sent the couple a detailed history of their account. Although it didn’t list dates, it showed Baxter’s payments since 2010 totaled $7,807.42. The balance remaining was $2,559.21.
“I was shocked,” Baxter told me Thursday. The couple also discovered on their statements from the company that the annual interest rate was 28.82%, she said.
According the account history, Dell Financial also had been tacking late fees and other charges onto Baxter’s account since the very first payment. Because there weren’t dates listed on the account history the company sent the couple, it’s unclear whether the company considered the first payment on time.
Baxter acknowledged she was late on some payments. However, she estimated “85% of the payments were made on time and every single one of those had service and late-fee charges, every time,” she said.
“Honestly we wouldn’t have gone with them if we realized it was 30% interest,” she said. Her lawsuit said that at that rate, making minimum payments, it would take 24 years to pay off the loan.
Baxter quit paying on the account in February. In May, she filed the lawsuit against Dell Financial.
The company “not only misrepresented the interest that Ms. Baxter was charged but the length of time it would take to pay off the $2,000.00 financing and failed to disclose that late charges would be charged to her for any late payments,” the lawsuit contends. “Most of the late charges were falsely charged to Ms. Baxter as the payments by her were paid on time.”
In a July response to the lawsuit, the company denied making any misrepresentations to Baxter.
“Plaintiff was fully advised of all pertinent terms of the Dell Preferred Account, which she opened in order to finance the purchase of a computer, including but not limited to the Annual Percentage Rate for Purchases, Penalty Annual Percentage Rate upon making late payments, Due Date for payments. Late Payment Fee. Over-the-Limit fee and Returned Payment fee,” the response said. “All interest charges and late payment fees were assessed to plaintiff’s account in strict adherence with the agreed upon and disclosed finance terms.”
In a 2006 federal court settlement in Tacoma, Washington, Dell Financial; its parent company, Dell Inc.; and CIT Bank agreed to pay up to $17 million in refunds of excess interest and late fees to Dell Preferred Account holders who alleged they were illegally overcharged. The three companies denied any wrongdoing, but agreed to change future sales practices.
In a 2008 ruling stemming from a lawsuit by New York’s attorney general, a judge found that Dell and Dell Financial engaged in “bait and switch” practices by advertising low financing rates but instead charging most customers much higher interest — as much as 30%.
“Dell has engaged in repeated misleading, deceptive and unlawful business conduct, including false and deceptive advertising of financing promotions and the terms of warranties, fraudulent, misleading and deceptive practices in credit financing and failure to provide warranty service and rebates,” state Supreme Court Justice Joseph Teresi wrote in the ruling.
In 2009, Dell agreed to pay New York $4 million to resolve the case.