ED Magedson – Founder
Dell Financial SevicesPO Box 81577, austin, texas 78708-1577 austin, Texas United States of America
I purchased two separate computers from Dell about six months apart. Both purchases qualified for a financing program which advertised 0% interest for 12 months.
I received a regular monthly statement from Dell Financial Services (DFS). In that statement I was billed for the second purchase which I would not receive until the subsequent billing period.
If this limited experience is any indication, Dell prematurely recognizes sales and is overstating income. If this is a widespread policy, Dells quarterly filings to regulators and shareholders are inaccurate. I am certain that Dells accounting and audit departments are familiar with GAAP revenue recognition principles (SFAC 5, Recognition and measurement of in Financial Statements of Business Enterprises) and a disregard for such basic rules is alarming.
In my particular case the effect was to overstate my balance, overstate my payment due and, as I have an automatic payment in place which did not take into account the premature charge, an underpayment penalty assessed to my account. Since the penalty is based on a policy that violates GAAP rules, the assessment and booking of penalties additionally overstates income and receivables. This prompted me to look closer at my subsequent statements.
I next noted that even though I paid more than my minimum balance (calculating the amount to payoff in 12 months), the excess over the minimum was not applied to the earliest purchase, or FIFO, as set forth under IRC Sec. 453 regulating Installment Sales.
Each statement reads payments are applied first to minimum required payments with excess to credit plans in order of promotion expiration date. I called DFS and was assured that FIFO was applied but I made the calculations and in fact I could see this representation was inaccurate.
The same statement also reads To avoid deferred finance charges, pay the new plan balance by the promotion expiration date. The promotion date may differ from your payment due date. I received my earliest purchase in the billing cycle ended 05/13/08 and a first payment is due on or around 06/13/08. Since Dell did not apply FIFO to my two balances as requested, and did not provide an accurate statement which showed the correct remaining balances, a balance of approximately $75.19 remained on my earliest account as of 05/13/09. Since this was deemed not paid within the 12 month interest free period the entire deferred interest charge was applied.
I immediately paid the entire balance of $1,211.39, less $90.83 of deferred interest, and closed my account. I spoke with a Dell Financial Services representative who explained that interest free for 12 months means that if the balance is not paid off within 12 months the entire deferred interest is charged. I assured Dell that this was not my understanding of the term, and while I am certain that Dell can direct my attention to the fine print, the plan was represented as interest free for 12 months and every monthly statement still labels the purchase plan as NO INT 12MOS.
Dell continues to send letters and phone my home attempting to collect the deferred interest plus additional late penalties. I always identify myself by name and ask the representative if they have read any of my earlier correspondence. The Dell representative is always stuck, because before they can speak, the Dell representative wants me it identify myself through additional personal information. I repsond back that it is Dell calling me and I should be the one to ask for proper identification.
To date there is the original $90.83 of deferred interest and $105.00 of late assessments on my account and Dell is threatening to put my account in default and notify the credit reporting services. Fortunately, I am completely debt free, employed and a homeowner, so Dell\'s threats have little impact, but I notified my employer\'s Employee Purchase Program and requested that Dell be removed as a preferred provider.
All of the above occurred before I went online and made a search for other "complaints". I was shocked to learn the extent of Dell's abusive practices, the number of lawsuits, and the numerous settlements in favor of the consumer most recently by the Attorney General's of NY in September 2009 and 34 state's Attorney General's in January 2009.
It appears at every level Dell, Inc. is engaged in questionable accounting practices; improper revenue recognition, assessment and billing of fees not supported by the underlying transactions, improper allocation of excess payments in contradiction to the plain language on the billing notice, and finally, deceptive names used to describe finance programs. If in the public market Dell, Inc. seeks me as either a customer or as investor I expect transparent accounting and fair business practices.
This report was posted on Ripoff Report on 12/08/2009 03:49 PM and is a permanent record located here: http://www.ripoffreport.com/r/Dell-Financial-Sevices/austin-Texas-78708-1577/Dell-Financial-Sevices-premature-billing-in-violation-of-GAAP-revenue-recognition-rules-a-536044. The posting time indicated is Arizona local time. Arizona does not observe daylight savings so the post time may be Mountain or Pacific depending on the time of year.
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