Providian Nears Settlement in Investigations

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Providian Financial Corp., one of the largest direct marketers of credit cards in the United States, yesterday said it was close to settling investigations into its marketing practices by the San Francisco district attorney and the U.S. Office of the Comptroller of the Currency.


On Monday, the San Francisco company, which markets credit products to high credit-risk consumers, said it settled a separate lawsuit by the Connecticut Attorney General's office with a payment of $1.6 million.


The company also revised its estimates for its yearly earnings to $4.24 to $4.34 per share. Excluding the anticipated settlement charges and other one-time events, the company said it would have expected per-share earnings of $5.10 to $5.20. Providian said that if it reaches additional settlements in the San Francisco and OCC discussions, the payments would have a one-time impact on its second quarter earnings.


Providian did not specify what the amount of the settlement payments might be.


The investigations by the OCC and San Francisco District Attorney relate to some of Providian's sales and marketing practices, primarily related to its Platinum credit cards. The company reportedly charged some consumers for add-on products that they did not agree to pay for and also wrongly charged late fees to customers who made payments on time. Providian attributed that mistake to a computer error.


During the past year since a flurry of lawsuits were filed against the company, Providian has implemented several enhancements to its credit card marketing program, including the Providian Guarantee, an offer to cancel all unwanted products and provide full refunds. The company also extended the grace period for late payments on credit cards; began digitally recording all outbound telemarketing calls; set up a special customer service hotline; and enhanced disclosure information in its printed material, in its telemarketing calls and on its Web site.


In a prepared statement, the company said the changes have improved customer satisfaction and retention. Providian did not return phone calls seeking comment.
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