Providian Settles Credit Card Suit

Wednesday, June 28th 2000, 12:00 am
By: News On 6

SAN FRANCISCO (AP) — Providian National Bank has agreed to pay about $300 million to consumers nationwide to settle allegations that it unfairly charged credit card customers.

The settlement was announced jointly on Wednesday by the Office of the Comptroller of the Currency in Washington and the San Francisco District Attorney's office. The settlement resulted from yearlong investigations of Providian's business practices by both agencies.

``When a bank engages in unfair or deceptive marketing practices, it damages its most precious asset — the trust and confidence of its customers,'' said Comptroller of the Currency John D. Hawke, Jr. ``That relationship of trust and confidence is central to the bank's safe and sound operation. We will not tolerate abuses that breach that trust through unfair and deceptive practices.''

Providian, which did not admit any wrongdoing, will also pay a $5.5 million fine to the city and county of San Francisco as part of the settlement.

The announcement comes a day after San Francisco District Attorney Terence Hallinan filed suit against Providian in Superior Court. It claimed the company made false and misleading statements to customers and engaged in ``deceptive and unlawful'' business practices.

Shailesh Mehta, Providian's chairman and chief executive, said in a statement that Providian was pleased to bring this issue to a close.

``We've already instituted a number of measures that have greatly enhanced our customer satisfaction and quality control programs,'' Mehta said.

Providian agreed last week to pay the state of Connecticut $1.6 million to end a similar investigation by the state's Attorney General. It also agreed to reimburse customers who can show they were harmed by the company.

The government agencies have been investigating allegations that Providian bullied customers into buying products and gouged cardholders with exorbitant fees to boost its profits.

In one program, Providian allegedly charged higher rates than promised for customers who transferred balances from their other credit cards. The company also allegedly failed to inform consumers about limitations on the coverage from a credit protection program it marketed.

The company has about 13 million customer accounts and $19.5 billion in outstanding loans. It still faces a series of consumer lawsuits seeking damages.

Under the terms of the agreements, Providian must refrain from making any misleading or deceptive presentations to consumers, and consumers must be given the right to cancel purchases up to 30 days after the first bill.