Providian to Pay at Least $300 Million to Settle OCC Investigation

Providian Financial Corp. said yesterday it would settle an investigation by the Office of the Comptroller of the Currency by paying at least $300 million to consumers and agreeing to alter its marketing practices. The bank, which was accused of using deceptive marketing tactics, charging consumers for products they did not agree to purchase and other practices, also agreed to pay $5.5 million to the San Francisco district attorney's office.

Last week Providian announced that the settlement negotiations were nearing an end and that it would incur the charges in its second fiscal quarter. The company agreed to make the payments without admitting guilt.

In addition to repaying consumers, Providian, San Francisco, will be required to clearly disclose all fees that a consumer must pay to open or maintain an account and must also receive “unambiguous” consent from customers before charging them for any credit card-related products or services, according to reports.

Providian said it already made some changes in its marketing practices, including clarifying its telemarketing scripts and direct mail solicitations and recording all outbound telemarketing calls. The company also established a “mystery shopping” program to obtain independent evaluations of customer service and instructed all Providian representatives to end their calls by asking the customer, “Are you satisfied?”

The majority of the payments to customers relate to sales and marketing practices the Company used in connection with two products: Guaranteed Savings, which was sold in the company's Platinum credit card business, and Credit Protection, which is sold in all card business lines. The company will also make payments on earlier purchases of other membership products.

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