Computer Retailer Settles Service Contract Problem

Attorney General Spitzer today announced a settlement with CompUSA that requires the company to change the way it markets and packages service contracts for portable computer devices bought at its stores.

The contracts, which cost up to $499 and promise "Full Replacement Coverage," are sold with laptop computers and pocket-sized personal computers (known as PDAs) to consumers at CompUSA's 11 New York superstores.

Spitzer began an investigation into the company's practices when a lawyer in his office who bought a PDA and an accompanying service contract at CompUSA's White Plains store was denied a free replacement for a broken screen that had been caused when the device was dropped.

In denying the claim, CompUSA personnel pointed to language in the service contract booklet which said that damage caused by dropping the device was not covered. However, the booklet containing details of the service contract, including its exceptions and limitations, was sealed inside a box that couldn't be opened until after the contract had been purchased.

Although the plan was described on the outside of the box as providing "Twenty Four Month Replacement Coverage" and "Complete Investment Protection," the booklet inside the box recited significant exemptions including damage and loss caused by theft and a limit of one replacement per 24 month period.

"When consumers are considering whether to purchase extended warranties, they have the right to consistent, forthright information about which services will and will not be covered," said Spitzer. "This settlement will ensure that consumers will be able to make a fully informed decision about whether to purchase a protection plan for CompUSA products."

Under the agreement, CompUSA will:

  • Make the service contract booklet available to consumers before they purchase a protection plan;
  • Use language on its packages that is consistent with the actual terms of the contract itself;
  • Correct the mistake in the booklet so that it now accurately reflects that damage caused by dropping the devices is covered;
  • Send letters to all consumers who have purchased service contracts, advising them of the error in the booklet. These consumers will be given the opportunity to resubmit any claim that was wrongfully denied or to submit any claim that was not made previously due to the error in the booklet. CompUSA will reimburse consumers who incurred costs for repairs and replacements that should have been covered.

Spitzer noted that CompUSA cooperated fully with his office during the investigation. The firm will pay $60,000 to cover the costs of the Attorney General's investigation.

This represents the second agreement that the Attorney General has reached with the company this year. In April, CompUSA agreed to change the way it advertises the sale of computers, and offers rebates, via the Internet.

The case was handled by Assistant Attorney General Doris Morin, under the supervision of Gary Brown, the head of Spitzer's Westchester Regional Office.