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EXHIBIT 99.2
TERENCE HALLINAN
District Attorney
DAVID A. PFEIFER, State Bar. No. 127785
Assistant Chief District Attorney
JUNE D. CRAVETT, State Bar No. 105094
Assistant District Attorney
732 Brannan Street
San Francisco, California 94103
Telephone: (415) 551-9537
BILL LOCKYER
Attorney General
HERSCHEL T. ELKINS
Senior Assistant Attorney General
SUSAN E. HENRICHSEN, State Bar No. 66174
IAN K. SWEEDLER, State Bar No. 169969
Deputy Attorneys General
110 West A Street, Suite 1100
San Diego, CA 92186-5266
Telephone: (619) 645-2081
Attorneys for Plaintiff, the People of the State of California
IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF SAN FRANCISCO
UNLIMITED JURISDICTION
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THE PEOPLE OF THE STATE OF CALIFORNIA, Case No. 313230
Plaintiff, STIPULATED FINAL
JUDGMENT AND PERMANENT
vs. INJUNCTION
PROVIDIAN FINANCIAL CORPORATION, a Delaware
corporation; PROVIDIAN BANK, a Utah corporation and
PROVIDIAN BANCORP SERVICES, a California corporation,
Defendants.
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Plaintiff, the People of the State of California, appearing through its
attorneys Terence Hallinan, District Attorney of the City and County of San
Francisco, by Assistant District Attorneys David A. Pfeifer and June D. Cravett,
and Bill Lockyer, Attorney General for the State of California, by Senior
Assistant Attorney General Herschel T. Elkins and Deputy Attorneys General Susan
E. Henrichsen and Ian K. Sweedler, and defendants Providian Financial
Corporation, Providian Bank and Providian Bancorp Services (hereinafter
collectively referred to as "defendant"), appearing through their attorneys
Keker & Van Nest, L.L.P., by Robert A. Van Nest and Jon S. Tiger; and it
appearing to the court that the parties hereto have stipulated and consented to
the entry of this final judgment without the taking of proof and without trial
or adjudication of any fact or law herein, without this Stipulated Final
Judgment and Permanent Injunction constituting evidence of or an admission by
any defendant regarding any issue of law or fact alleged in the Complaint, and
without any defendant admitting any liability herein, and the court having
considered the matter and good cause appearing therefor,
IT IS HEREBY ORDERED, ADJUDGED AND DECREED that:
A. This court has jurisdiction of the parties hereto and the subject
matter hereof.
B. The Stipulated Final Judgment and Permanent Injunction entered into by
the parties has been reviewed by the court and it is found to have been entered
in good faith and to be in all respects suitable and equitable.
C. Pursuant to the Stipulation for Entry of Final Judgment and Permanent
Injunction, the parties have agreed to the entry of this final judgment and
permanent injunction.
D. The injunctive provisions of this Stipulated Final Judgment and
Permanent Injunction shall be applicable to defendants Providian Financial
Corporation, Providian Bank and Providian Bancorp Services, as well as their
subsidiaries; their successors and the assigns of all or substantially all the
assets of their businesses; their directors, officers, employees, agents,
independent contractors, partners, associates and representatives of each of
them; and to all persons, corporations and other entities acting in concert or
in participation with any of them with actual or constructive knowledge of this
Stipulated Final Judgment and Permanent Injunction.
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DEFINITIONS
E. The following definitions shall apply to this Stipulated Final
Judgment and Permanent Injunction:
(1) "Account Related Charges" means all charges to an account other
than purchases, charges for fee-based products and cash advances initiated
by the consumer. "Account Related Charges" includes all other charges, for
example, finance charges, application fees, annual membership fees, credit
line increase fees, late fees, over limit fees and points.
(2) "APR" means annual percentage rate, as defined in Regulation Z,
12 C.F.R. Part 226.
(3) "Attempt by defendant to have the consumer retain" shall mean:
(a) With respect to defendant's Gold, Platinum and Capital Cash
product, a transfer of the consumer to any retention or salvage unit;
and
(b) With respect to defendant's Classic, Gateway and secured
products, any transaction reported as a "salvaged" or "saved" sale (or
similar term) in defendant's computerized databases, provided however,
that for Credit Protection and PricePro in defendant's Classic product
line during the period preceding June 1999, an "attempt by defendant
to have the consumer retain" shall mean any transaction where the
reason for the call is reported in defendant's computerized databases
as "Credit Protection" or "PricePro" and the account notes indicate
that the consumer attempted to cancel the product or asserted that
they had not agreed to purchase the product.
(4) "Clear and conspicuous" shall mean that the disclosure is
readable and reasonably understandable (or in the case of oral disclosures
audible and reasonably understandable) and designed to call attention to
the nature and significance of the information in the disclosure. For
example, if a claim as to a feature or benefit is made in a written
advertisement or solicitation, and there is any material limitation or
condition that is not disclosed in close proximity to the claim, this clear
and conspicuous standard
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requires that:
(a) The advertisement or solicitation shall contain a reference
to the limitation, condition or cost disclosure in type of at least 10
point type size (other than on the outside of a direct mail envelope,
where the text shall be in at least 8 point type size) either in close
proximity to the claim or, if indicated by an asterisk affixed to the
claim, on the page where the claim is stated;
(b) The reference shall call attention to the fact that the
disclosure contains limitation, condition or cost information, by
using the terms "limitation" or "condition" or "cost" or their
substantial equivalents;
(c) The reference shall direct the consumer to the location of
the disclosure, which shall be in or with the advertisement or
solicitation; and
(d) The actual disclosure of limitation, condition or cost
information shall itself be readable and reasonably understandable and
designed to call attention to the nature and significance of the
information in the disclosure.
These requirements would apply to situations where, for example, a claim is
made regarding the cost of a feature or benefit, but such claim is subject
to material conditions or limitations. And where, as another example, a
claim, explicitly or by implication, indicates that a feature or benefit is
without cost, but there is a material cost for the feature or benefit.
(5) "Days" shall mean calendar days unless otherwise specified.
(6) "Defendant" shall mean defendants Providian Financial
Corporation, Providian Bank and Providian Bancorp Services, and each of
them.
(7) "Interest Rate Proof" shall mean the material provided, verbally
or in writing, by a consumer to defendant which indicates the interest
rate(s) the consumer was paying to other creditors on the balance(s)
transferred to defendant.
(8) "Finance charge" shall have the same meaning as that term has in
Regulation Z, 12 C.F.R.. Part 226.
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(9) "Misleading" and "Deceptive" shall mean any act or omission that
is misleading or deceptive within the meaning of the Federal Trade
Commission Act or California Business & Professions Code (S) 17200 or (S)
17500.
(10) "Periodic Rate" and "periodic statement" shall have the same
meaning as those terms have in Regulation Z, 12 C.F.R. Part 226.
(11) "Personalized Interest Rate" shall mean the non-introductory
periodic rate defendant applied to balance(s) transferred by the consumer
to defendant pursuant to the Guaranteed Savings Rate program.
(12) "Settlement Date" shall mean the date of entry of this Stipulated
Final Judgment and Permanent Injunction.
(13) "Telemarketing," "telephone conversation," "telephone sale" and
"telephone solicitation" all include both calls initiated by defendant and
calls initiated by a consumer unless specifically provided otherwise.
"Telemarketing," "telephone conversation," "telephone sale" and "telephone
solicitation" shall not include communications conducted over the Internet.
(14) "Written" and "writing" shall include communications over the
Internet.
PERMANENT INJUNCTION
F. Pursuant to Business and Professions Code sections 17203 and 17535,
defendant is subject to the following mandatory and prohibitory injunctive
provisions related to its Guaranteed Savings Rate Program and any other type of
balance transfer program:
(1) Defendant shall comply with the Fair Credit Reporting Act, as
amended, 15 U.S.C. (S)(S) 1681-1681u, as construed in published
interpretations of, and pronouncements concerning, the Fair Credit
Reporting Act by the Comptroller of the Currency, the Federal Trade
Commission and the Federal Financial Institutions Examinations Council.
(2) Defendant shall not make any misleading or deceptive
representation, expressly or by implication, to any consumer concerning the
Guaranteed Savings Rate program.
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(3) Defendant shall not make any misleading or deceptive
representation, expressly or by implication, to any consumer concerning the
extent of savings that could be achieved by transferring balances to
defendant.
(4) Unless defendant states the actual APR or periodic rate that
would apply, then, in addition to any other disclosures required by law or
regulation, defendant shall, in any oral or written advertisement or
solicitation, including communications about use(s) of an existing credit
account, make the additional disclosures required by paragraph F(5) if,
anywhere in such advertisement or solicitation, defendant states:
(a) Any positive or negative number describing the APR, periodic
rate, interest rate, finance charge or payment amount that applies, or
would apply, to the account or any portion of the account; or
(b) That the APR, periodic rate, interest rate, finance charge or
payment amount that applies, or would apply, to the account or any
portion of the account, whether or not stated as a positive or
negative number, is in any way based upon an APR, periodic rate,
interest rate, finance charge or payment amount the consumer had been
charged, is being charged, or is charged in the future by another
creditor or other creditors.
(5) The additional disclosures required by paragraph F(4) shall be:
(a) If the advertisement or solicitation represents, expressly or
by implication, that the consumer will achieve savings through the
product's or program's APR or periodic rate relative to the rate(s)
charged by the consumer's existing or future creditor(s), defendant
shall clearly and conspicuously disclose the maximum savings, stated
as a percentage reduction in the APR or periodic rate, achievable
pursuant to the product or program. "Percentage reduction," as used
in this paragraph, refers to a "difference" as that term is used in
mathematics. (For example, the percentage reduction from fifteen
percent (15%) to thirteen percent (13%) is two percent (2%).);
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(b) If there is any condition or limitation on the consumer
achieving the maximum savings disclosed in paragraph F(5)(a),
defendant shall clearly and conspicuously disclose the existence of
such condition or limitation, and defendant shall clearly and
conspicuously disclose the maximum APR or maximum periodic rate (or
maximum addition to prime rate or other benchmark rate, if the rate is
a variable rate), stated as a percentage, that could apply if the
consumer fails to meet such condition or exceeds such limitation; and
(i) Describe the assumptions used to calculate, conditions
for, and limitations on, achieving the maximum savings
attributable to the APR or periodic rate; or
(ii) Advise the consumer how to obtain a description of the
assumptions used to calculate, conditions for, and limitations
on, achieving the maximum savings attributable to the APR or
periodic rate, and that the consumer should not make any final
decision before obtaining and reviewing such information; and
(c) If any APR or periodic rate is subject to an introductory or
prove-up period, or is otherwise temporary under the account terms,
defendant shall clearly and conspicuously disclose that the APR or
periodic rate is a temporary rate and the length of the introductory
period or the time such rate will expire.
(6) For any product or program in which the APR or periodic rate
applied, or to be applied, is determined, in whole or in part, by
information supplied by the consumer concerning the APR or periodic rate
the consumer is paying, or has paid, to other creditors, defendant shall:
(a) Mail a response to the consumer within five (5) days of
receipt of the information supplied by the consumer, and shall state
clearly and conspicuously in that response whether the information is
sufficient to determine the APR or periodic rate to be applied to the
consumer's account, and the APR or periodic rate, stated as a
percentage, that would apply based on the information
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supplied by the consumer; and
(b) If defendant considers the information supplied by the
consumer unsatisfactory to determine what APR or periodic rate would
apply, defendant shall:
(i) In the response required by paragraph F(6)(a), provide
a statement to the consumer disclosing the reason(s) the
information is considered unsatisfactory by defendant and provide
a description of the type of information defendant typically
considers satisfactory to determine the APR or periodic rate that
applies, or would apply; and
(ii) Before taking any action unfavorable to such consumer,
provide the consumer with at least thirty (30) days from the
mailing of the response to submit additional information.
(7) If defendant would otherwise charge a fee when a balance is
transferred away from defendant, defendant shall allow a consumer to
transfer a balance from defendant to another creditor without imposing that
fee if the balance is transferred within thirty (30) days of the mailing of
the first periodic statement which reflects any non-introductory rate
applied to a balance or balances previously transferred by the consumer to
defendant. Defendant shall clearly and conspicuously disclose this
provision as an account term, and on such periodic statement.
(8) In any advertisement or solicitation regarding a balance
transfer, where that transfer may be subject to a balance transfer fee,
defendant shall clearly and conspicuously disclose:
(a) The existence of the balance transfer fee;
(b) The amount of the balance transfer fee; and
(c) The specific circumstances under which the balance transfer
fee may be imposed.
(9) Defendant shall implement the provisions of paragraphs F(4)
through F(8) within ninety (90) days of the Settlement Date.
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G. Pursuant to Business and Professions Code sections 17203 and 17535,
defendant is subject to the following mandatory and prohibitory injunctive
provisions related to Credit Protection and any other type of "Payment Deferral
Product" (as that term is defined in paragraph G(2), below):
(1) Defendant shall not make any misleading or deceptive
representation, expressly or by implication, to any consumer concerning the
benefits of Credit Protection. (2) Defendant shall not make any misleading
or deceptive representation, expressly or by implication, to any consumer
concerning any product or program designed or advertised to assist
consumers in the event of involuntary unemployment, hospitalization,
accident, sickness or disability ("Payment Deferral Product").
(3) In all oral or written advertisements, solicitations or other
communications with consumers that promote Credit Protection or any other
Payment Deferral Product, defendant shall clearly and conspicuously
disclose either:
(a) All limitations on the benefits of Credit Protection or the
Payment Deferral Product, as applicable; or
(b) That the benefits of Credit Protection or the Payment
Deferral Product, as applicable, are subject to material limitations,
that the limitations are described in the written terms and conditions
for the product, and that the consumer should read these limitations
before purchasing the product.
(4) Defendant shall not, as a result of the activation of Credit
Protection benefits or any other Payment Deferral Product benefits,
restrict or limit the consumer's ability to use any emergency credit line
on the consumer's account, whether or not such line is part of a separate
product. This shall not limit defendant's ability to freeze the consumer's
account (other than the emergency credit line) during the period of
activation, provided that defendant provides a clear and conspicuous
written disclosure to the consumer at or before the purchase of Credit
Protection or the Payment Deferral Product (in a manner not inconsistent
with the other provisions of paragraph G), and again at the
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time of activation of the benefits, that activation of Credit Protection or
other Payment Deferral Product benefits will result in defendant freezing
the consumer's account but will not affect the consumer's ability to use
any emergency credit line.
(5) Defendant shall not make a sale of Credit Protection or any other
Payment Deferral Product to a consumer until defendant has provided the
consumer with a complete description of Credit Protection or the Payment
Deferral Product. Except as provided in paragraphs G(6) and G(7), the
prohibition of this paragraph includes any type of "negative-response" or
"negative-option" sale, including, but not limited to, any sale that
provides the consumer with a free review, trial, or sample period, whereby
the consumer is obligated to begin paying for the product if the consumer
does not cancel the product by the end of such period.
(6) Defendant may provide a consumer with a free review, trial or
sample period, without providing the consumer in advance with a complete
written description of the terms and conditions of Credit Protection or the
Payment Deferral Product if:
(a) Defendant clearly and conspicuously discloses to the
consumer in advance that:
(i) The free review, trial or sample period is without
obligation;
(ii) During such period, defendant will provide the consumer
with the complete terms and conditions in writing; and
(iii) The product will expire at the end of such period and
no charges will be made to the consumer, unless the consumer,
after receiving the complete written description of the product,
affirmatively and expressly agrees to purchase the product; and
(b) Defendant acts in accordance with the disclosures of
paragraph G(6)(a).
(7) Defendant may provide the consumer with a free review, trial or
sample
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period for Credit Protection or other Payment Deferral Product and may
begin to charge the consumer for such product at the end of that period if
the consumer does not cancel the product by the end of that period, only
if:
(a) Prior to the solicitation offering the free review, trial or
sample period, defendant provides the consumer in advance with a
complete written description of the terms and conditions of Credit
Protection or the Payment Deferral Product;
(b) Defendant confirms that such description was received by the
consumer and provides the consumer with the opportunity to ask
questions;
(c) Defendant discloses all significant and material limitations
of Credit Protection or the Payment Deferral Product;
(d) Defendant clearly and conspicuously discloses to the
consumer that a charge will automatically be imposed by defendant if
the consumer does not cancel the product by the end of the period, and
the amount of such charge;
(e) The consumer states affirmative agreement that he or she
understands that a charge will automatically be imposed by defendant
if the consumer does not cancel the product by the end of the period,
prior to agreeing to the free review, trial or sample period;
(f) The communications required by paragraphs G(7)(b), G(7)(c),
G(7)(d) and G(7)(e) are tape recorded and maintained by defendant for
a period of at least twelve (12) months after the expiration of the
free review, trial or sample period, provided however, after one year
after the Settlement Date, the tape recording shall be maintained for
a period of nine (9) months, and provided further, if defendant
becomes aware of any dispute concerning the sale of the product to the
consumer prior to the end of such twelve (12) or nine (9) month
period, as applicable, defendant shall maintain the recording until
the dispute has been finally resolved; and
(g) Within ten (10) days after beginning of the free review,
trial or
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sample period, defendant shall mail a written confirmation to the
consumer that clearly and conspicuously discloses:
(i) The date of the telephone sale;
(ii) The name of the fee-based product;
(iii) The amount of the charge for the fee-based product;
(iv) The fact that defendant will begin to charge the
consumer at the end of the free review, trial or sample period
together with the date the free review, trial or sample period
will end;
(v) The consumer's right to cancel, without any charge,
within thirty (30) days from the date of the mailing of the
periodic statement where the charge first appears; and
(vi) The telephone number the consumer should use to cancel
the product.
(8) Defendant shall allow any consumer who is charged, on other than
a monthly basis, for Credit Protection or other Payment Deferral Product to
cancel such product for any reason or no reason and, in such event, shall
provide the consumer with a pro rated refund of fees.
(9) Defendant shall ensure that agreements for Credit Protection and
other Payment Deferral Products do not contain terms or conditions that are
not enforced by defendant.
(10) Except in the consumer's favor (meaning only a reduction in price
without a reduction in benefits, removal of limitations without a reduction
of benefits, or the addition of benefits without additional costs or
limitations), defendant shall ensure that the agreements for Credit
Protection and other Payment Deferral Products do not provide defendant the
unilateral right to renounce or modify any of the terms of the product
under the agreement.
(11) Defendant shall mail copies of the revised terms and conditions
of Credit Protection to all consumers currently paying for, or being
provided with, Credit
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Protection, with the changed terms clearly and conspicuously identified and
explained.
(12) Defendant shall implement the provisions of paragraphs G(3)
through G(11) within ninety (90) days of the Settlement Date.
H. Pursuant to Business and Professions Code sections 17203 and 17535,
defendant is subject to the following mandatory and prohibitory injunctive
provisions related to its "No Annual Membership Fee" promotion:
(1) Defendant shall not make any misleading or deceptive
representation, expressly or by implication, to any consumer concerning
credit cards represented to require the payment of "No Annual Membership
Fee." Defendant shall not advertise or market any credit card as having
"No Annual Membership Fee" or "No Annual Fee" if the consumer is required
to pay a fee in order to open or maintain a credit card account, or the
consumer is required to pay a fee for any product, service, or membership
associated with the account. The provisions of this paragraph shall not
apply to optional products that are offered in conjunction with, or
subsequent to the receipt of, a credit card, but that are not required to
be purchased in order to open or maintain the credit card account. The
provisions of this paragraph also shall not apply to one-time application
or processing fees, provided such fees are clearly and conspicuously
disclosed to the consumer.
(2) Defendant shall not make any misleading or deceptive
representation to any consumer concerning the fees it charges to open or
maintain an account with defendant.
(3) Within ninety (90) days of the Settlement Date, defendant shall
ensure that its advertising, telemarketing scripts, written solicitations,
and processes adequately disclose to the consumer all fees that are
required to be paid to defendant in order to open or maintain an account
with defendant. Defendant shall ensure that:
(a) Any solicitation or telemarketing script that contains a
representation of annual fees or other fees required to open or
maintain an account shall also include:
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(i) Clear and conspicuous disclosures of all fees required
to be paid by the consumer in order to open or maintain an
account with defendant; and
(ii) Clear and conspicuous disclosures identifying the
benefits of an account that require the payment of fees and the
amount of such fees; and
(b) Any advertisement that contains a representation of annual
fees or other fees required to open or maintain an account shall also
include a clear and conspicuous disclosure that other fees may be
charged to open or maintain the account, if, in fact, other such fees
may be charged by defendant.
(4) Defendant shall not refer to a feature of an account as a
"benefit" if such feature requires payment of a fee by the consumer,
provided, however, this prohibition shall not apply if such reference
includes an immediate clear and conspicuous disclosure that the "benefit"
requires payment of a fee and the amount of the fee.
(5) Within ninety (90) days of the Settlement Date, for each consumer
who was automatically charged Credit Protection fees, between June 15, 1995
and the Settlement Date, when opening an account with defendant in response
to any advertisement, solicitation or statement which indicated that no
annual membership fee or no annual fee would be imposed on the account, and
who continues to maintain such account, defendant shall offer the consumer
the option of:
(a) Maintaining the account with the terms adjusted so that no
Credit Protection fees or annual fees will be required to be paid by
the consumer to maintain the account, provided that defendant shall
not adjust any other account term in a manner that is unfavorable to
the consumer during the period that the consumer continues to maintain
the account, and provided further, that the consumer may not use the
account to make new charges to the account so adjusted after three (3)
months following the date the consumer elects this option (a);
(b) Maintaining the account on the existing terms, after
affirming in
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writing that they wish to do so following receipt of the revised
Credit Protection disclosure required by paragraph G of this
Stipulated Final Judgment and Permanent Injunction; or
(c) Being transferred to a replacement account without Credit
Protection and without Credit Protection fees or other membership or
regularly recurring fees of any kind except for an annual fee of
fifty-nine dollars ($59).
(6) Any consumer described in paragraph H(5) who does not select one
of the options described in that paragraph within ninety (90) days after
defendant mails notification to the consumer of such options, may be
transferred to the replacement account described in paragraph H(5)(c),
provided defendant complies with the notice requirements of Regulation Z,
12 C.F.R. Part 226, with respect to a change in terms and the account
agreement between the consumer and defendant permits such a change in
terms.
I. Pursuant to Business and Professions Code sections 17203 and 17535,
defendant is subject to the following mandatory and prohibitory injunctive
provisions related to its "Real Check" promotion and any other type of "Reward
Promotion" (as that term is defined in paragraph I(2), below):
(1) Defendant shall not make any misleading or deceptive
representation to any consumer concerning the "Real Check" promotion.
(2) Defendant shall not make any misleading or deceptive
representation to any consumer concerning any reward, rebate, or other
promotion promising the payment of a particular dollar amount of money to,
or a specific dollar reduction in the debt of, the consumer ("Reward
Promotion").
(3) Within ninety (90) days of the Settlement Date, defendant shall
ensure that its advertising, telemarketing scripts, written solicitations,
and processes adequately disclose to the consumer the specific terms of the
Real Check promotion and any other Reward Promotion. Any solicitation,
telemarketing script or advertisement that contains a representation
concerning the Real Check or any other Reward Promotion shall also
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include:
(a) A clear and conspicuous disclosure of the dollar amount of
any balance a consumer is required to transfer to defendant, the APR
or periodic rate, stated as a percentage, that would apply to the
transferred balance, any balance transfer or other fee that might
apply to the transferred balance, and the amount of time such balance
transfer must be maintained at defendant in order to qualify for a
benefit under the Real Check promotion or any other Reward Promotion;
(b) A clear and conspicuous disclosure of any purchases the
consumer must make using the account, or balances the consumer must
carry on the account, and the APR or periodic rate, stated as a
percentage, that would apply to those purchases or balances, in order
to qualify for a benefit under the Real Check promotion or any other
Reward Promotion; and
(c) Clear and conspicuous disclosure of all fees, costs or other
requirements imposed upon the consumer in order to qualify for a
benefit under the Real Check promotion or any Reward Promotion.
J. Pursuant to Business and Professions Code sections 17203 and 17535,
defendant is subject to the following mandatory and prohibitory injunctive
provisions related to the sale of fee-based products (including Credit
Protection and other Payment Deferral Products):
(1) Defendant shall not make any misleading or deceptive
representations, either expressly or by implication, to any consumer
concerning the purchase of fee-based products, including, but not limited
to Credit Protection, Credit Connections Plus, DrivePro, Driver's
Protection Plan, PricePro, and Providian Health Advantage.
(2) Within ninety (90) days of the Settlement Date, defendant shall
ensure that its advertising, telemarketing scripts, written solicitations,
and processes require explicit agreement from a consumer to purchase a fee-
based product before defendant treats the communication with the consumer
as a sale of such product to the consumer. All written and oral
communications subject to this paragraph shall include:
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(a) During any telephone solicitation, defendant shall make a
clear and conspicuous request to charge the consumer's account;
(b) During any telephone solicitation, defendant shall make a
clear and conspicuous summary of the charge, followed by a clear and
conspicuous request that the consumer confirm that the summary is
correct, and defendant shall charge the account only if, after that
request, the consumer expressly consents to purchase the product and
to have the purchase charged to the consumer's account;
(c) Within ten (10) days after any telephone sale of a fee-based
product, defendant shall mail a written confirmation to the consumer
that clearly and conspicuously discloses:
(i) The date of the telephone sale;
(ii) The name of the fee-based product;
(iii) The amount of the charge for the fee-based product;
(iv) The consumer's right to cancel, without any charge,
within thirty (30) days from the date of the mailing of the
periodic statement on which the charge first appears; and
(v) The telephone number the consumer should use to cancel
the product.
(d) Defendant shall, on the periodic statement where the fee-
based product charge is first reflected, clearly and conspicuously
notify the consumer of the consumer's right to cancel the product
purchase with a refund of the charge within thirty (30) days;
(e) Defendant shall, on each periodic statement reflecting a
charge for a fee-based product, identify the charge as a transaction;
and
(f) In any telephone conversation in which a consumer indicates,
in substance, that they did not authorize, did or do not want, did or
do not need, or wish to cancel, a fee-based product, defendant shall
immediately agree to cancel the product without attempting to re-sell
the product. Provided, however, if
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defendant requests and receives affirmative consent from the consumer
to provide information concerning the product, defendant may, only
after receiving such affirmative consent, attempt to re-sell the
consumer the product. Affirmative consent under this paragraph
requires that, before initiating any attempt to re-sell, defendant
state clearly and conspicuously first, that the consumer has the
option of immediately canceling the product, then that the consumer
also has the option of receiving further information on the product,
and the consumer, after being advised of these options, affirmatively
states agreement that he or she would like to receive information on
the product. Defendant shall immediately cancel the fee-based product
unless the consumer affirmatively states agreement that he or she
would like to receive information on the product.
K. Pursuant to Business and Professions Code sections 17203 and 17535,
defendant is subject to the following mandatory and prohibitory injunctive
provisions related to balance transfers:
(1) Defendant shall not make any misleading or deceptive
representations, either expressly or by implication, to any consumer
concerning balance transfers.
(2) Within ninety (90) days of the Settlement Date, defendant shall
ensure that its advertising, telemarketing scripts, written solicitations,
and processes require explicit agreement from a consumer to transfer a
balance to defendant before defendant treats the communication with the
consumer as authorization to transfer such balance. The communications
subject to this paragraph shall include:
(a) During any telephone solicitation, defendant shall make a
clear and conspicuous request to transfer a balance to defendant;
(b) During any telephone solicitation, defendant shall make a
clear and conspicuous summary of the balance transfer, followed by a
clear and conspicuous request that the consumer confirm that the
summary is correct;
(c) Within ten (10) days after any telephone sale of a balance
transfer, defendant shall mail a written confirmation to the consumer
that clearly and
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conspicuously discloses:
(i) The date of the telephone sale;
(ii) The amount of the balance transfer;
(iii) The name of the creditor from whom the balance is to
be transferred;
(iv) The APR or periodic rate, stated as a percentage, that
applies, or would apply, to the balance transfer, or the formula
by which the APR or periodic rate will be determined, and in
conformance with the requirements of paragraph F, if applicable;
(v) The date the balance is to be transferred to
defendant, which shall not be less than fifteen (15) days after
the mailing of the notice described in paragraph K(2)(c),
provided however, that for transactions which were not recorded
as provided in paragraph U, the date shall be not less than
thirty (30) days after the telephone sale, and provided further,
that if the consumer has previously received a notice in writing
that contains the information required by paragraphs K(2)(c)(iv)
and K(2)(c)(vii), and the consumer initiated the phone call for
the purpose of making a balance transfer, and such call is
recorded as provided in paragraph U, the transfer may take place
at any time after the call;
(vi) The right of the consumer to cancel the balance
transfer, without any charge, if canceled by the date the balance
is to be transferred to defendant;
(vii) The right of the consumer to transfer the balance out
of defendant, without any balance transfer fee, within thirty
(30) days after the mailing of the periodic statement on which
the balance transfer first appears, if the account terms allow a
balance transfer fee to be charged on the transfer of a balance
away from defendant; and
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(viii) The telephone number the consumer should use to
cancel the balance transfer.
(d) If defendant would otherwise charge a fee to transfer a
balance away from defendant, defendant shall, on the periodic
statement where a balance transfer is first reflected, clearly and
conspicuously notify the consumer of the consumer's right to transfer
the balance from defendant to another creditor within thirty (30) days
without any balance transfer fee by defendant; and
(e) In any telephone conversation prior to the transfer of a
balance in which a consumer indicates, in substance, that they did not
authorize, did or do not want, did or do not need, or wish to cancel,
a balance transfer, defendant shall immediately agree to cancel the
balance transfer without attempting to re-sell the consumer the
balance transfer. Provided, however, if defendant requests and
receives affirmative consent from the consumer to provide information
concerning the benefits of a balance transfer, defendant may, only
after receiving such affirmative consent, attempt to re-sell the
balance transfer. Affirmative consent under this paragraph requires
that defendant state clearly and conspicuously first, that the
consumer has the option of immediately canceling the balance transfer,
then, that the consumer also has the option of receiving information
about the benefits of the balance transfer and the consumer, after
being advised of these options, affirmatively states agreement that he
or she would like to receive information on the benefits of the
balance transfer. Defendant shall immediately cancel the balance
transfer unless the consumer affirmatively states agreement that he or
she would like to receive information on the benefits of the balance
transfer.
L. Pursuant to Business and Professions Code sections 17203 and 17535,
defendant is subject to the following mandatory and prohibitory injunctive
provisions related to late fees:
(1) Defendant shall not charge any consumer a late fee in connection
with a payment received by defendant by the due date specified on the
consumer's periodic statement.
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(2) Defendant shall continuously maintain its payment processing and
information systems to ensure that payments are promptly credited to
consumers' accounts in accordance with 12 C.F.R. (S) 226.10. Such systems
shall include a process to monitor and evaluate all consumer complaints
made to, and brought to the attention of, defendant. This process shall
monitor and evaluate the nature, frequency, and other characteristics of
consumer communications and, if those communications indicate a possible
systemic problem in the posting and crediting of consumer payments,
defendant shall promptly investigate the matter and shall determine whether
its payment processing and information systems require further revisions.
(3) Defendant shall strictly adhere to the provisions of 12 C.F.R.
(S) 226.13 in connection with any billing error notice based upon an
alleged failure of defendant to promptly credit a consumer's account in
accordance with 12 C.F.R. (S) 226.10.
(4) Defendant shall promptly reverse any late fee and shall reverse
any increased pricing and other adverse financial consequences imposed on a
consumer in connection with a payment that was received by defendant by the
due date specified on the consumer's periodic statement but treated as a
late payment by defendant.
(5) If defendant waives or reverses a late fee, defendant shall, at
that time, inform the consumer whether it will also waive or reverse any
related increased pricing or other adverse financial consequences.
(6) If defendant has publicly announced a grace period for acceptance
of late payments as if received on time, defendant shall not shorten that
grace period without first announcing the change in the same fashion as the
grace period was first publicly announced.
(7) As required by 12 C.F.R. (S) 226.25, defendant shall maintain
evidence of its compliance with the prompt posting requirements of
Regulation Z. Such material shall include evidence that defendant has
sufficient processes to determine whether, despite written procedures to
the contrary, defendant is systemically failing to comply with the prompt
posting requirements of Regulation Z.
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(8) Defendant shall implement the provisions of paragraphs L(2)
through L(7) within ninety (90) days of the Settlement Date.
M. Pursuant to Business and Professions Code sections 17203 and 17535,
defendant is subject to the following mandatory injunctive provisions related to
performance based pricing:
(1) Defendant shall ensure that its account agreements adequately
disclose how its performance based pricing may affect consumers. These
agreements shall include:
(a) A clear and conspicuous explanation of what factors
defendant considers in performance based pricing; and
(b) If defendant utilizes any form of debt-to-income ratios, a
clear and conspicuous statement that the consumer should apprise
defendant of any increase in the consumer's income.
(2) If defendant increases a consumer's finance or other Account
Related Charges based on any form of a debt-to-income ratio, defendant
shall, on the first periodic statement where the finance or other Account
Related Charges are increased on that basis, clearly and conspicuously
disclose the reason for the increase and that the consumer should contact
defendant to update the consumer's income information.
(3) If the income information submitted by any consumer pursuant to
paragraph M(2) reflects a greater amount of income than defendant had
utilized in its debt-to-income ratio calculation for that consumer,
defendant shall recalculate the consumer's debt-to-income ratio and shall
adjust the consumer's account so that the consumer is not required to pay
any greater amount of finance or other Account Related Charges than the
consumer would have paid if defendant had originally used the recalculated
debt-to-income ratio.
(4) Defendant shall maintain its information systems to ensure that
incomes greater than five digits are accurately recorded.
(5) Defendant shall implement the provisions of paragraphs M(2)
through M(4) within ninety (90) days of the Settlement Date.
N. Pursuant to Business and Professions Code sections 17203 and 17535,
defendant
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is subject to the following mandatory and prohibitory injunctive provisions
related to cash advance checks:
(1) If cash advance checks are sent to consumers, defendant shall
ensure that the consumers receive adequate disclosures of the costs and
limitations of those checks.
(2) Defendant shall not charge any overlimit fee to, or impose any
increased pricing or other adverse financial consequences on a consumer
who exceeds his or her credit limit due to the negotiation of a cash
advance check containing an amount pre-printed by defendant.
(3) Defendant shall not charge any returned check fee for any cash
advance check containing an amount pre-printed by defendant that is
returned by defendant because honoring the check would cause the consumer
to exceed his or her credit limit.
(4) Defendant shall establish a buffer so that cash advance check(s)
containing an amount pre-printed by defendant shall together total at
least five hundred dollars ($500) less than the cardholder's available
credit, (including any line increase that would be made available upon use
of the check(s)) at the time the checks are prepared by defendant.
(5) Any cash advance check containing an amount pre-printed by
defendant shall be sent to the consumer no later than ten (10) days after
defendant determines the consumer's available credit pursuant to
paragraph N(4).
(6) Defendant shall clearly and conspicuously disclose on each cash
advance check, or on an attachment to such check, whether or not such check
contains an amount pre-printed by defendant:
(a) That the check is subject to the consumer's available
credit;
(b) A phone number by which the consumer can determine his or
her available credit;
(c) That defendant charges a fee when a consumer exceeds his or
her credit limit and the amount of such fee, if, in fact, defendant
charges such a fee;
(d) That defendant will impose a cash advance fee for
negotiation of
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the check and the amount of such fee, if, in fact, defendant charges
such a fee;
(e) That defendant will impose a credit line increase fee in
connection with negotiation of the check and the amount of such fee,
in fact, defendant will provide the consumer with a credit line
increase and impose a credit line increase fee upon negotiations of
the check; and
(f) The APR or periods rate that would apply to any balance
created by negotiation of the cash advance check.
(7) Defendant shall implement the provisions of paragraph N within
ninety (90) days of the Settlement Date.
O. Pursuant to Business and Professions Code sections 17203 and 17535,
defendant is subject to the following mandatory injunctive provisions
related to disclosures on potential credit limits:
(1) Within ninety (90) days of the Settlement Date, defendant shall
ensure that potential credit limits are adequately disclosed to consumers
prior to or simultaneously with providing the consumers with an application
or otherwise permitting the consumers to apply for a credit card or other
open-end credit account. The disclosures required by this paragraph shall
include:
(a) For any product or program where the entire potential credit
limit is not available for any purpose, defendant shall clearly and
conspicuously disclose the potential credit limit for each of the
following categories:
(i) Cash advances;
(ii) Purchases; and
(iii) Balance transfers; and
(b) For any product or program where defendant applies a
different periodic rate to different categories of charges, defendant
shall clearly and conspicuously disclose:
(i) The APR or periodic rate that applies to each
category of charges;
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(ii) Whether the APR or periodic rate is fixed or variable
for each category of charges; and
(iii) Defendant's method of applying payments to each
category of charges.
P. Pursuant to Business and Professions Code sections 17203 and 17535,
defendant is subject to the following mandatory injunctive provisions related to
the issuance of credit cards:
(1) Within ninety (90) days of the Settlement Date, defendant shall
ensure that its advertising, telemarketing scripts, written solicitations
and processes strictly comply with the requirements of 12 C.F.R. (S)
226.12(a). Such advertising, telemarketing scripts, written solicitations
and processes shall permit the issuance of a credit card to a consumer only
after receiving an unambiguous, affirmative request for, or agreement to
apply for and receive, that card from the consumer.
(2) Within one hundred eighty (180) days of the Settlement Date,
defendant shall ensure that each periodic statement clearly and
conspicuously discloses, in a prominent manner not inconsistent with
Regulation Z, 12 C.F.R. Part 226, and no lower than one-third (1/3) from
the top of the periodic statement, the account balance outstanding on the
date of the closing of the billing cycle.
Q. Pursuant to Business and Professions Code sections 17203 and 17535,
defendant is subject to the following mandatory injunctive provisions related to
home equity loans:
(1) Within ninety (90) days of the Settlement Date, defendant shall
revise its advertising, telemarketing scripts, written solicitations and
processes to ensure adequate disclosure of its home equity loans and home
equity lines of credit. These revisions shall include:
(a) A clear and conspicuous disclosure in all advertisement and
solicitations that the product or program relates to a home equity
loan or home equity line of credit and not a credit card account; and
(b) Strict compliance with 12 C.F.R. (S) 226.5b.
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R. Pursuant to Business and Professions Code sections 17203 and 17535,
defendant is subject to the following mandatory injunctive provisions related to
credit line increases:
(1) In any advertisement or solicitation regarding a credit line
increase on an existing account, or the availability of a future credit
line increase on a new account, defendant shall clearly and conspicuously
disclose all charges and changes in account terms resulting from acceptance
of the increase, including:
(a) That a fee will be charged and the amount of the fee, if in
fact defendant would charge such a fee as a result of the credit line
increase;
(b) That there will be an increase in the APR or periodic rate
on the account and the new APR or periodic rate that will apply, if in
fact defendant will increase the APR or periodic rate as a result of
the credit line increase; and
(c) That there will be an increase in the annual fee or
membership fee and the amount of the fee, if in fact defendant will
increase such fee as a result of the credit line increase.
(2) For all accounts in which defendant charges or may charge a fee
for an automatic credit line increase, defendant shall:
(a) In the account terms, clearly and conspicuously disclose the
amount of the fee for the credit line increase and the consumer's
right to cancel the credit line increase within thirty (30) days with
a refund of the fee; and
(b) On the periodic statement where the fee for the credit line
increase is reflected, clearly and conspicuously disclose the
consumer's right to cancel the credit line increase within thirty (30)
days with a refund of the fee.
(3) Defendant shall implement the provisions of paragraph R within
ninety (90) days of the Settlement Date.
S. Pursuant to Business and Professions Code sections 17203 and 17535,
defendant is subject to the following mandatory injunctive provisions related to
unwanted telemarketing calls:
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(1) Defendant shall maintain a centralized database identifying all
consumers who have requested that they receive no further telephone
solicitations from defendant ("No Call List").
(2) During any telemarketing solicitation in which a consumer
requests or expresses a desire that defendant make no further calls to the
consumer, defendant shall immediately inform the consumer that the consumer
has a right to be placed on defendant's No Call List. Consistent with
paragraph S, defendant shall, in fact, place the consumer on defendant's No
Call List, and no further telemarketing solicitations shall be made to such
consumer.
(3) Within forty-eight (48) hours of receipt thereof, defendant shall
distribute the consumer's No Call List request to all of its business
units, which shall thereafter comply with the consumer's request within ten
(10) days of such distribution.
(4) Defendant shall implement the provisions of paragraph S within
ninety (90) days of the Settlement Date.
T. Pursuant to Business and Professions Code sections 17203 and 17535,
defendant is subject to the following mandatory and prohibitory injunctive
provisions related to inactive accounts:
(1) Defendant shall not close a consumer's account based on
inactivity unless:
(a) Defendant refunds any annual fees, membership fees, or fees
for add-on products that have been charged on the account which, if
the account remained open, would confer a benefit for any period of
time beyond the date of the closure, pro rated for the period of time
before the account is closed; and
(b) Defendant reports the closure to the credit agencies as a
"consumer closure," or otherwise ensures that the consumer's credit
rating is not adversely affected by the closure.
(2) Defendant shall submit corrected reports to the appropriate
credit reporting agencies for any consumer account closed for inactivity
which had not been
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reported as a "consumer closure" during the period June 15, 1995, through
the Settlement Date.
(3) Defendant shall implement the provisions of paragraph T within
ninety (90) days of the Settlement Date.
U. Pursuant to Business and Professions Code sections 17203 and 17535,
defendant is subject to the following mandatory and prohibitory injunctive
provisions related to the recording of telemarketing calls:
(1) For any telemarketing transaction in which defendant sells a
credit card, balance transfer, or fee-based product, defendant shall
continue to use reasonable efforts to tape record the "close" portion of
the telephone call, including a summary of the terms of the sale and the
consumer's request or application for the credit card, or affirmative
agreement to make the balance transfer or buy the product, as applicable.
(2) Defendant shall not represent to a consumer that the consumer
provided affirmative agreement to a transaction because the transaction was
tape recorded, unless defendant has, in response to the consumer's inquiry
or complaint, reviewed the tape recording and confirmed such affirmative
agreement and does not refuse to make the tape recording available to the
consumer.
(3) Defendant shall retain such tape recordings in a retrievable
manner for a period not less than twelve (12) months during the first year
after the Settlement Date, and thereafter shall retain such tape recordings
in a retrievable manner for a period not less than nine (9) months,
provided however, if defendant becomes aware of any dispute concerning the
sale of the credit card, balance transfer, or fee-based product to the
consumer prior to the end of such twelve (12) or nine (9) month period, as
applicable, defendant shall maintain the recording until the dispute has
been finally resolved.
(4) Nothing in paragraph U shall supersede or modify any other
provision of this Stipulated Final Judgment and Permanent Injunction.
V. Pursuant to Business and Professions Code sections 17203 and 17535,
defendant is subject to the following mandatory injunctive provisions related to
the resolution of individual
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complaints:
(1) To the extent not previously resolved, defendant shall resolve in
a reasonable manner all individual complaints of which it became aware or
becomes aware, between June 15, 1995, through one hundred twenty (120)
days after the Settlement Date to the satisfaction of the San Francisco
District Attorney's consumer complaint staff. The provisions of this
paragraph require defendant to fairly evaluate and take appropriate
action(s) to correct any actual harm caused to consumers by the fault of
defendant, but do not require defendant to accede to any unreasonable
demands. Defendant shall promptly provide the San Francisco District
Attorney's consumer complaint staff with any materials requested concerning
such complaints. Within one hundred eighty (180) days after the Settlement
Date, defendant shall provide the San Francisco District Attorney's
consumer complaint staff with a list of all complaints subject to this
paragraph and shall provide a brief description of the resolution.
(2) Beginning one hundred twenty (120) days after the Settlement Date
and continuing thereafter, defendant shall continue to comply with the
provisions of paragraph V(1), except that defendant shall not be required
to provide the San Francisco District Attorney's consumer complaint staff
with the list described in the last sentence of that paragraph.
RESTITUTION
W. Pursuant to Business and Professions Code sections 17203 and 17535,
defendant shall make restitution to consumers in connection with the Guaranteed
Savings Rate program in the following manner:
(1) Defendant shall provide restitution to all consumers who
transferred balances from other creditors to defendant pursuant to the
Guaranteed Savings Rate program during the period June 15, 1995, through
the Settlement Date, to the extent not previously refunded by defendant.
The amount of restitution paid to each such consumer shall be based on the
periodic rate applied to each balance the consumer transferred to
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defendant and each balance transfer fee paid by the consumer, determined as
follows:
(a) For each balance transferred to defendant by a consumer who
submitted Interest Rate Proof on all or some of the balances the
consumer transferred to defendant and all such Interest Rate Proof was
accepted by defendant in calculating that consumer's Personalized
Interest Rate that would be applied by defendant to such balance, the
restitution amount shall be calculated for the period beginning on the
date defendant first applied the Personalized Interest Rate to such
balance and ending one year after such balance was transferred to
defendant, and shall equal the sum of:
(i) The total difference between the periodic rate finance
charges actually charged by defendant by application of the
consumer's Personalized Interest Rate and attributable to the
transferred balance each period, and the amount of periodic rate
finance charges that would have been charged by defendant for
such period if the periodic rate applied to the transferred
balance had been two percent (2.0%) lower than the weighted
average periodic rate calculated from the Interest Rate Proof
submitted to defendant by the consumer (prior to any periodic
rate adjustment previously made by defendant); and
(ii) Interest on each difference of periodic rate finance charges
calculated in paragraph W(1)(a)(i), beginning on the date of the
mailing of each periodic statement reflecting application of the
consumer's Personalized Interest Rate to the transferred balance, and
continuing through the Settlement Date, at a rate of ten percent (10%)
per annum;
(b) For each balance transferred to defendant by a consumer who
submitted Interest Rate Proof to defendant on all or some of the
balances the consumer transferred to defendant and any such Interest
Rate proof was not accepted by defendant in calculating that
consumer's Personalized Interest Rate
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that would be applied by defendant to such balance, the restitution
amount shall be calculated for the period beginning on the date
defendant first applied the Personalized Interest Rate to such balance
and ending one year after such balance was transferred to defendant,
and shall equal the sum of:
(i) The total difference between the periodic rate finance
charges actually charged by defendant by application of the
consumer's Personalized Interest Rate and attributable to the
transferred balance each period, and the amount of periodic rate
finance charges that would have been charged if the periodic rate
applied to the transferred balance had been not greater than the
weighted average periodic rate calculated from the Interest Rate
Proof submitted by all consumers receiving restitution by the
method described in paragraph W(1)(a) (prior to any periodic rate
adjustment previously made by defendant) less two percent (2%);
and
(ii) Interest on each difference of periodic rate finance
charges calculated in paragraph W(1)(b)(i), beginning on the date
of the mailing of each periodic statement reflecting application
of the consumer's Personalized Interest Rate to the transferred
balance, and continuing through the Settlement Date, at a rate of
ten percent (10%) per annum;
(c) For each balance transferred to defendant by a consumer who
submitted Interest Rate Proof on none of the balances the consumer
transferred to defendant from which defendant could calculate that
consumer's Personalized Interest Rate that would be applied by
defendant to such balance, the restitution amount shall be calculated
for the period beginning on the date defendant first applied a non-
introductory periodic rate to such balance and ending one year after
such balance was transferred to defendant, and shall equal:
(i) The total difference between the periodic rate finance
charges actually charged by defendant by application of the non-
introductory periodic rate and attributable to the transferred
balance each
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period, and the amount of periodic rate finance charges that
would have been charged if the periodic rate applied to the
transferred balance had been three percent (3.0%) lower than the
periodic rate actually charged by defendant;
(ii) Less the difference between the amount of periodic
rate finance charges that would have been charged by defendant by
application of the non-introductory periodic rate first applied
to such balance and the amount of periodic rate finance charges
actually charged by defendant for such period, but no more than
the total of paragraph W(1)(c)(i); and
(iii) Plus, interest on each difference of periodic rate
finance charges calculated by subtracting the amount calculated
in paragraph W(1)(c)(ii) from the amount calculated in paragraph
W(1)(c)(i), beginning on the date of the mailing of each periodic
statement reflecting application of a non-introductory periodic
rate to the transferred balance, and continuing through the
Settlement Date, at a rate of ten percent (10%) per annum;
(d) For each balance described in paragraphs W(1)(a), W(1)(b) or
W(1)(c) transferred to defendant less than one year prior to the
Settlement Date, defendant shall provide restitution by the method
required by paragraph HH only for the period(s) beginning on the date
a non-introductory periodic rate was applied to such balance and
continuing through the period that includes the date described in
paragraph HH(5). Thereafter, and continuing until one year after the
date the balance was transferred to defendant, defendant shall provide
restitution by a credit to the consumer's account each period;
(e) For any consumer who transferred more than one balance to
defendant and different non-introductory periodic rates applied to
different balances, the formulas described in paragraphs W(1)(a),
W(1)(b) and W(1)(c) shall be calculated based upon the periodic rate
applicable to each transferred balance;
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(f) For each consumer who was charged a balance transfer fee
upon transfer of a balance away from defendant, the restitution amount
shall be, in addition to any restitution required elsewhere in
paragraph W, the sum of:
(i) The amount of each balance transfer fee; and
(ii) Interest on each balance transfer fee, beginning on
the date the balance transfer fee was charged to the consumer's
account and continuing through the Settlement Date, at a rate of
ten percent (10%) per annum.
(g) Any adjustment to a periodic rate required by paragraph W
shall be calculated on the basis of a one-year period. Any adjustment
to a periodic rate required by paragraph W shall mean a "difference"
as that term is used in mathematics. (For example, a two percent (2%)
reduction from a periodic rate of fifteen percent (15%) is thirteen
percent (13%).); and
(h) "Weighted average periodic rate calculated from the Interest
Rate Proof submitted by all consumers receiving restitution by the
method described in paragraph W(1)(a)" refers to a single average
periodic rate, calculated from June 15, 1995 through the Settlement
Date, and not a floating average periodic rate.
X. Pursuant to Business and Professions Code sections 17203 and 17535,
defendant shall make restitution to consumers in connection with Credit
Protection in the following manner:
(1) Defendant shall make restitution to the following consumers who
were charged Credit Protection fees, during the period June 15, 1995,
through the Settlement Date:
(a) Any consumer who, within four (4) months of the date of the
mailing of the periodic statement first reflecting a charge for Credit
Protection, canceled Credit Protection;
(b) Any consumer who, within four (4) months of the date of the
mailing of the periodic statement first reflecting a charge for Credit
Protection,
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contacted defendant and was subject to any "attempt by defendant to
have the consumer retain" (as that phrase is defined in paragraph E)
Credit Protection; and
(c) Any consumer who, at any time, submitted a claim to activate
his or her Credit Protection benefits, and who was either unable to
obtain Credit Protection benefits or was limited to less than eighteen
(18) months of Credit Protection benefits, in either case, on any of
the following bases:
(i) Benefits were limited to the number of months the
consumer had previously paid Credit Protection fees;
(ii) Benefits for involuntary unemployment could not be
used until the consumer had paid at least three months of Credit
Protection fees;
(iii) Benefits for involuntary unemployment could not be
used if the consumer became involuntarily unemployed from a part-
time job;
(iv) The hospitalization, sickness and disability benefits
could not be used until after the consumer had paid at least six
months of Credit Protection fees, if the hospitalization,
sickness or disability were caused by a pre-existing condition;
(v) Benefits could not be used if the consumer's credit
card account was not current;
(vi) Benefits were not available if the consumer's credit
card account was over-limit;
(vii) Benefits were not available if the consumer, or any
higher-income member of the consumer's household, made more than
the minimum payment on any credit card account (except a credit
card account extended by defendant) while receiving Credit
Protection benefits;
(viii) Benefits were not available if the consumer accessed
any credit from defendant or the consumer's other creditors while
receiving Credit Protection benefits; or
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(ix) Benefits were not available for involuntary
unemployment if the consumer were self-employed.
(2) The amount of restitution payable by defendant to each consumer
described in paragraph X(1) shall be the sum of:
(a) The amount of Credit Protection fees charged to the
consumer's account during the period June 15, 1995, through the
Settlement Date and not previously refunded; and
(b) Interest, from each date Credit Protection fees were charged
to the consumer's account and continuing through the Settlement Date,
at a rate of ten percent (10%) per annum.
(3) "Canceled" and "cancel" as used in paragraph X means elimination
of Credit Protection from the account with or without imposition of another
fee, migration to a different product or program that does not include
Credit Protection, or closure of the account at the request of the
consumer.
Y. Pursuant to Business and Professions Code sections 17203 and 17535,
defendant shall make restitution to consumers in connection with the "Real
Check" promotion in the following manner:
(1) Defendant shall provide restitution to the following consumers
who opened an account with defendant pursuant to defendant's "Real Check"
promotion and did not receive the maximum Real Check amount advertised or
offered. The amount of restitution to be paid to such consumers shall be
calculated as follows:
(2) For any consumer who transferred a balance of any amount from
another creditor to such account at defendant, the amount of restitution
shall be:
(a) The maximum Real Check amount advertised or offered to the
consumer, less any Real Check amount previously paid to the consumer;
and
(b) Interest, on the amount described in paragraph Y(2)(a), from
the date the balance was transferred to defendant and continuing
through the Settlement Date, at a rate of ten percent (10%) per annum.
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(3) For any consumer who did not transfer a balance to such account
at defendant, but such account incurred any periodic or Account Related
Charges, the amount of restitution shall be:
(a) The total amount of the periodic and other Account Related
Charges, up to the maximum Real Check amount advertised or offered to
the consumer, and less any Real Check amount previously paid to the
consumer; and
(b) Interest, on each finance or other Account Related Charge,
from the date of the mailing of the periodic statement first
reflecting such charge through the Settlement Date, at a rate of ten
percent (10%) per annum.
Z. Pursuant to Business and Professions Code sections 17203 and 17535,
defendant shall make restitution to consumers in connection with the sale of
fee-based products (excluding Credit Protection) in the following manner:
(1) Defendant shall provide restitution to the following consumers
who during the period June 15, 1995, through the Settlement Date, were
charged for any fee-based product (excluding only Credit Protection) that
was marketed through telemarketing:
(a) Any consumer who, within four (4) months of the date of the
mailing of the periodic statement first reflecting a charge for the
purchase of, or enrollment in, the fee-based product, canceled the
fee-based product; and
(b) Any consumer who, within four (4) months of the date of the
mailing of the periodic statement first reflecting a charge for the
purchase of, or enrollment in, the fee-based product, contacted
defendant and was subject to any "attempt by defendant to have the
consumer retain" the fee-based product, and canceled the product at
any time prior to the Settlement Date.
(2) The amount of restitution payable by defendant to each consumer
identified in paragraph Z(1) shall equal the sum of:
(a) The total amount of fees charged to the consumer for the
purchase of, or enrollment in, the fee-based product and not
previously refunded; and
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(b) Interest, from each date a fee was charged to the consumer's
account for the purchase, or enrollment in, the fee-based product and
continuing through the Settlement Date, at a rate of ten percent (10%)
per annum.
AA. Pursuant to Business and Professions Code sections 17203 and 1735,
defendant shall make restitution to consumers in connection with late fees in
the following manner:
(1) Defendant shall provide restitution to each consumer who,
defendant is aware or becomes aware, during the period June 15, 1995,
through the Settlement Date, was charged a late fee in connection with a
payment that was received by defendant by the due date specified on the
consumer's periodic statement and was not previously reversed or refunded.
(2) The amount of restitution payable by defendant to each consumer
described in paragraph AA(1) shall be the sum of:
(a) The total amount of late fees charged in connection with
payments received by defendant by the due date specified on the
consumer's periodic statement; and
(b) Interest, from the date each such late fee was charged to
the consumer's account and continuing through the Settlement Date, at
a rate of ten percent (10%) per annum.
(3) For each consumer described in paragraph AA(1) on whose account
finance or other Account Related Charges were increased based in whole or
in part on the basis of a payment that was received by defendant by the
date specified on the consumer's periodic statement but was treated as a
late payment by defendant, defendant shall:
(a) Within ninety (90) days of the Settlement Date, adjust such
consumer's account to reflect the terms and conditions that would have
applied if such payment had not been treated as a late payment by
defendant; and
(b) In addition to the restitution payable to such consumer
under paragraph AA(2), pay to such consumer the sum of:
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(i) The difference between the total amount of finance and
other Account Related Charges actually imposed during the period June
15, 1995 through the Settlement Date, and the total amount of finance
and other Account Related Charges that would have been imposed if such
payment had not been treated as a late payment by defendant; and
(ii) Interest, from the date each finance or other Account
Related Charge was imposed and continuing through the Settlement Date,
at a rate of ten percent (10%) per annum.
BB. Pursuant to Business and Professions Code sections 17203 and 17535,
defendant shall make restitution to consumers in connection with performance
based pricing in the following manner:
(1) Defendant shall provide restitution to, and shall make
adjustments to the accounts of, each consumer on whose account, during the
period June 15, 1995, through the Settlement Date:
(a) Income was recorded by defendant as $99,999, although
information available to defendant indicated that the consumer's
income was higher than $99,999;
(b) Finance or other Account Related Charges were increased, in
whole or in part, due to an increase in the consumer's unsecured debt;
and
(c) Such finance or other Account Related Charges would not have
been increased, or would have been increased by a smaller amount, if
defendant had accurately recorded the consumer's income.
(2) To the extent not previously refunded, the amount of restitution
required under paragraph BB(1) shall be the sum of:
(a) The difference between the total amount of finance and other
Account Related Charges actually imposed during the period June 15,
1995, through the Settlement Date, and the total amount of finance and
other Account Related Charges that would have been imposed if
defendant had accurately
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<PAGE>
recorded the consumer's income; and
(b) Interest, from the date each finance or other Account
Related Charge was imposed and continuing through the Settlement Date,
at a rate of ten percent (10%) per annum.
(3) For any consumer entitled to restitution pursuant to paragraph
BB(2), defendant shall, within ninety (90) days after the Settlement Date,
adjust the consumer's account to the terms and conditions that would have
applied if defendant had accurately recorded the consumer's income.
CC. Pursuant to Business and Professions Code sections 17203 and 17535,
defendant shall make restitution to consumers in connection with cash advance
checks in the following manner:
(1) Defendant shall provide restitution to, and shall make
adjustments to the account of, each consumer who, during the period June
15, 1995, through the Settlement Date, negotiated a cash advance check that
contained an amount pre-printed by defendant in excess of the amount of
credit available to the consumer at the time the check was negotiated that
resulted in the imposition of finance or other Account Related Charges on
the basis of the consumer exceeding his or her credit limit.
(2) To the extent not previously refunded, the amount of restitution
required to be paid to each consumer described in paragraph CC(1) shall be
the sum of:
(a) The difference between the total amount of finance and other
Account Related Charges actually imposed during the period June 15,
1995, through the Settlement Date, and the total amount of finance and
other Account Related Charges that would have been imposed if the
consumer had not exceeded his or her credit limit by negotiation of
such cash advance check; and
(b) Interest, from the date each finance or other Account
Related Charge was imposed and continuing through the Settlement Date,
at a rate of ten percent (10%) per annum.
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<PAGE>
(3) For each consumer entitled to restitution pursuant to paragraph
CC(2), defendant shall adjust the consumer's account to the terms and
conditions that would have applied if the consumer had not exceeded his or
her credit limit by negotiation of the cash advance check. This adjustment
shall include any credit line increases the consumer otherwise would have
been offered.
(4) For each consumer entitled to restitution pursuant to paragraph
CC(2), defendant shall correct any information supplied to any credit
reporting agency indicating that the consumer exceeded his or her credit
limit by negotiation of the cash advance check.
(5) Defendant shall implement the provisions of paragraphs CC(3) and
CC(4) within ninety (90) days of the Settlement Date.
RESERVE AND PAYMENT FLOOR
DD. Within ten (10) days of the Settlement Date, defendant shall reserve
or deposit into a segregated deposit account an amount not less than THREE
HUNDRED MILLION DOLLARS ($300,000,000) ("Payment Floor").
EE. Within sixty (60) days of the Settlement Date, defendant shall reserve
or deposit into a segregated deposit account such additional amounts as are
necessary to fully fund the restitution provisions of this Stipulated Final
Judgment and Permanent Injunction.
FF. Defendant shall make all restitution payments required by this
Stipulated Final Judgment and Permanent Injunction, regardless of whether the
total of such payments exceeds the Payment Floor. If the total of such payments
is less than the Payment Floor, defendant shall make additional payments, as
required by paragraph HH of this Stipulated Final Judgment and Permanent
Injunction, up to the amount of the Payment Floor.
GG. The following shall not apply against the Payment Floor:
(1) Any offsets permitted by paragraph HH(16), regardless of when
made;
(2) Any payments defendant has made prior to the Settlement Date; and
(3) Any payments defendant makes after the Settlement Date, unless
expressly made pursuant to, and in conformity with, this Stipulated Final
Judgment and
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<PAGE>
Permanent Injunction.
METHOD OF PAYMENT
HH. The restitution required by this Stipulated Final Judgment and
Permanent Injunction shall be made as follows:
(1) Defendant shall make restitution payments and other payments (not
including civil penalties) required by this Stipulated Final Judgment and
Permanent Injunction in conformity with paragraph HH.
(2) Defendant shall produce a list of each restitution payment to each
consumer required to be made pursuant to each paragraph of this Stipulated Final
Judgment and Permanent Injunction that requires the payment of restitution
("Payment List"). Before compiling this Payment List, defendant shall update
the addresses for all consumers to whom restitution is owed who are no longer
account holders by conducting a standard address search using the National
Change of Address System. Defendant shall provide the Certified Public
Accounting firm described in paragraph LL of this Stipulated Final Judgment and
Permanent Injunction with the Payment List which shall contain all of the
following information:
(a) The amount of each payment;
(b) The name, mailing address and account number of the consumer
to whom the payment is required to be made;
(c) The paragraph number pursuant to which payment is required;
and
(d) Whether the consumer will be paid by offset pursuant to
paragraph HH(16).
(3) Defendant shall use reasonable efforts to provide a complete or
partial Payment List to the Certified Public Accounting firm within thirty
(30) days of the Settlement Date. In any event, defendant shall provide a
complete Payment List to the Certified Public Accounting firm no later than
sixty (60) days of the Settlement Date.
(4) Defendant shall pay interest, in addition to any other interest
required by this Stipulated Final Judgment and Permanent Injunction, on
each payment for which the information required by paragraph HH(2) is
provided to the Certified Public Accounting
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<PAGE>
firm later than thirty (30) days after the Settlement Date. The amount of
such interest shall be calculated on the basis of the amount of the
payment, at a rate of ten percent (10%) per annum, for a period of thirty
(30) days.
(5) After receiving approval from the San Francisco District
Attorney, defendant shall, within ten (10) days, mail the restitution
checks, in the restitution amounts required by this Stipulated Final
Judgment and Permanent Injunction, to all consumers who are not being paid
by offset pursuant to paragraph HH(16). The checks shall be made payable to
the consumers and shall be sent by United States Postal Service first-class
mail, address correction service requested. The face of the checks shall
clearly and conspicuously state "VOID IF NOT NEGOTIATED WITHIN 180 DAYS."
The checks shall be mailed in an envelope approved by the San Francisco
District Attorney. Enclosed with each check shall be a letter provided by
the San Francisco District Attorney, which shall be provided to defendant
within ten (10) days of the Settlement Date and shall be in a form
substantially similar to Appendix A, attached hereto. The envelope shall
contain no other materials other than those specified by paragraph HH.
(6) Defendant shall, for each consumer to whom a restitution check is
mailed, update the Payment List to include:
(a) The restitution check number;
(b) The amount of the restitution check; and
(c) The date the restitution check was mailed.
(7) Defendant shall continuously update the Payment List to include
the date each restitution check is returned for any reason or the date each
check was negotiated, as applicable.
(8) For a period of one hundred twenty (120) days from the date the
restitution checks are mailed, defendant shall make reasonable attempts to
locate any consumers whose restitution checks were returned for any reason.
If defendant has information that the consumer is deceased, defendant shall
make reasonable efforts to pay the restitution to the consumer's estate or
the consumer's heirs, as appropriate.
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<PAGE>
(9) One hundred eighty-seven (187) days after the restitution checks
are mailed, defendant shall void all checks that defendant has been unable
to deliver to the consumer, the consumer's estate, or the consumer's heirs,
or that have not been negotiated. For each consumer whose check has been
voided, defendant shall update the Payment List to reflect that fact and
shall provide the Public Accounting firm with the complete updated Payment
List.
(10) Within twenty (20) days after voiding the restitution checks
pursuant to paragraph HH(9), defendant shall calculate the amount of
"Excess Funds." The amount of Excess Funds shall be calculated as follows:
(a) If the aggregate dollar amount of restitution checks mailed
pursuant to paragraph HH(5) was less than the Payment Floor, the
amount of Excess Funds is the sum of:
(i) The difference between the Payment Floor and the
aggregate dollar amount of restitution checks mailed pursuant to
paragraph HH(5); and
(ii) The aggregate dollar amount of checks voided pursuant
to paragraph HH(9); or
(b) If the aggregate dollar amount of restitution checks mailed
pursuant to paragraph HH(5) was greater than or equal to the Payment
Floor, the amount of Excess Funds is the aggregate dollar amount of
checks voided pursuant to paragraph HH(9).
(11) The entire amount of Excess Funds shall be distributed to
consumers who were mailed a restitution check pursuant to paragraph HH(5)
and whose checks were not voided pursuant to paragraph HH(9). The amount
of Excess Funds to be distributed to each such consumer shall be the same
proportion of Excess Funds as the proportion of that consumer's restitution
payment has to the aggregate dollar amount of restitution checks mailed
pursuant to paragraph HH(5) less the aggregate amount of checks voided
pursuant to paragraph HH(9). Within twenty (20) days after voiding the
restitution
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<PAGE>
checks pursuant to paragraph HH(9), defendant shall update the Payment List
to reflect the amount of Excess Funds due to each eligible consumer, and
shall provide the complete updated list to the Certified Public Accounting
firm.
(12) Within thirty (30) days after receiving approval from the San
Francisco District Attorney, defendant shall mail the Excess Funds checks.
The Excess Funds checks shall be payable to each consumer, and shall be
sent by United States Postal Service first-class mail, address correction
service requested. The face of the checks shall clearly and conspicuously
state "VOID IF NOT NEGOTIATED WITHIN 180 DAYS." The checks shall be mailed
in an envelope approved by the San Francisco District Attorney. Enclosed
with each check shall be a letter provided by the San Francisco District
Attorney, which shall be provided to defendant within ten (10) days of the
Settlement Date, and which shall be in a form substantially similar to
Appendix B, attached hereto. The envelope shall contain no other materials
other than those specified by paragraph HH. Defendant shall, for each
consumer to whom an Excess Funds check is sent, update the Payment List to
include:
(a) The Excess Funds check number;
(b) The amount of the Excess Funds check; and
(c) The date the Excess Funds check was mailed.
(13) Defendant shall continuously update the Payment List to include
the date each Excess Funds check was returned for any reason, or the date
each Excess Funds check was negotiated, as applicable.
(14) One hundred eighty-seven (187) days after the Excess Funds checks
are mailed, defendant shall void all checks that defendant has been unable
to deliver to the consumer, the consumer's estate, or the consumer's heirs,
or that have not been negotiated. Within twenty (20) days of voiding the
Excess Funds checks, defendant shall update the Payment List and shall
provide the updated Payment List to the Certified Public Accounting firm
and shall calculate and advise the Certified Public Accounting firm of the
aggregate total of:
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<PAGE>
(a) The Excess Funds checks that were received by consumers but
not negotiated; and
(b) The Excess Funds checks that were returned for any reason.
(15) Defendant shall comply with the directions of the San Francisco
District Attorney concerning the disposal of the unclaimed Excess Funds.
(16) Defendant shall offset a restitution payment to a consumer
required by this Stipulated Final Judgment and Permanent Injunction against
amounts that have been charged off on the consumer's account, subject to
the limitations of this paragraph. Such offset shall be limited to charge-
offs for the principal amount of charges for purchases, cash advances, and
balance transfers, incurred by the consumer, exclusive of finance charges,
other Account Related Charges and any fees for the purchase of, or
enrollment in, defendant's fee-based products that were charged-off by
defendant. To the extent that the restitution amount owed by defendant to
the consumer pursuant to this Stipulated Final Judgment and Permanent
Injunction exceeds such principal amount, defendant shall send such
consumer a restitution check pursuant to paragraph HH(5), and shall
otherwise comply, as to that consumer, with paragraphs HH(5) through
HH(15). For any offset conducted pursuant to this paragraph, defendant
shall notify the consumer of such offset and shall make the appropriate
report to the appropriate credit reporting agencies.
(17) The San Francisco District Attorney shall provide to defendant
the name of the Certified Public Accounting firm and the scope of the San
Francisco District Attorney's engagement of the firm. The San Francisco
District Attorney shall allow five (5) days for defendant to comment on
these matters, but shall not be bound to resolve any objections or accept
any suggestions by defendant.
JOINT SETTLEMENT: TREATMENT OF PAYMENTS
II. As a result of joint efforts, the People of the State of California
have entered into this Stipulated Final Judgment and Permanent Injunction with
Providian Financial Corporation, Providian Bank and Providian Bancorp Services,
and the Comptroller of the Currency has entered
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<PAGE>
into a Consent Order with Providian National Bank.
JJ. Any payment made by Providian National Bank pursuant to the Consent
Order shall be considered as discharging any identical payment obligation by
Providian Financial Corporation and Providian Bancorp Services pursuant to this
Stipulated Final Judgment and Permanent Injunction.
KK. Any payment made by Providian Financial Corporation and Providian
Bancorp Services pursuant to this Stipulated Final Judgment and Permanent
Injunction shall be considered as discharging any identical payment obligation
by Providian National Bank pursuant to the Consent Order, to the extent that
such payment:
(1) Is made to a customer or previous customer of Providian National
Bank;
(2) Is required by the Consent Order; and
(3) Complies with all the requirements of the Consent Order.
MONITORING
LL. The restitution required by this Stipulated Final Judgment and
Permanent Injunction shall be monitored as follows:
(1) Within thirty (30) days after the Settlement Date, the San
Francisco District Attorney shall engage the services of a Certified Public
Accounting firm to monitor compliance with all provisions of this
Stipulated Final Judgment and Permanent Injunction that require payments to
consumers. The engagement shall provide that the San Francisco District
Attorney, and not defendant, is the client of the Certified Public
Accounting firm and that the firm shall treat all information obtained as a
result of the engagement confidential.
(2) The San Francisco District Attorney shall require, as part of the
engagement, that the Certified Public Accounting firm:
(a) Provide a report that evaluates defendant's compliance with
paragraphs HH(1) and HH(2) of this Stipulated Judgment and Permanent
Injunction. The firm shall provide this report to the San Francisco
District Attorney within a reasonable time after receiving the Payment
List from defendant
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<PAGE>
pursuant to paragraph HH(2);
(b) Provide a report that evaluates defendant's compliance with
paragraphs HH(3) through HH(9). The firm shall provide this report to
the San Francisco District Attorney within a reasonable time after
receiving the updated Payment List from defendant pursuant to
paragraph HH(9); and
(c) Provide a report that evaluates defendant's compliance with
paragraphs HH(10) through HH(14) and paragraph HH(16). The firm shall
provide this report to the San Francisco District Attorney within a
reasonable time after being advised of the total of unclaimed Excess
Funds from defendant pursuant to paragraph HH(14).
(3) Defendant shall make available to the Certified Public Accounting
firm all records, reports and other information necessary, in the judgment
of the firm, under the direction of the San Francisco District Attorney, to
accomplish full and complete evaluation of defendant's compliance with all
provisions of this Stipulated Final Judgment and Permanent Injunction that
require restitution payments.
(4) Defendant shall be responsible for all expenses associated with
the requirements of paragraph LL, including, but not limited to, all
professional fees to the Certified Public Accounting firm.
CIVIL PENALTIES
MM. At the time of entry of this Stipulated Final Judgment and Permanent
Injunction, defendant shall pay civil penalties to plaintiff, the People of the
State of California, pursuant to Business and Professions Code sections 17206
and 17536 in the amount of FIVE MILLION FIVE HUNDRED THOUSAND DOLLARS
($5,500,000). Payment shall be made by cashier's check made payable to the
"City and County of San Francisco," and shall be delivered to the San Francisco
District Attorney's Office, Consumer & Environmental Protection Unit, 732
Brannan Street, San Francisco, California, Attn: June D. Cravett, Assistant
District Attorney.
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RETENTION OF JURISDICTION
NN. Jurisdiction is retained by the court for the purpose of enabling any
party to the Stipulated Final Judgment and Permanent Injunction to apply to the
Court at any time for such further orders and directions as may be necessary or
appropriate for the construction or the carrying out of this Stipulated Final
Judgment and Permanent Injunction, for the modification or dissolution of any
injunctive provisions hereof, for enforcement of compliance herewith, and for
the punishment of violations hereof, if any.
OO. This Stipulated Final Judgment and Permanent Injunction shall take
effect immediately upon entry thereof, without further notice to defendant.
PP. The clerk is ordered to enter this Stipulated Final Judgment and
Permanent Injunction forthwith.
DATED: June 27, 2000 /S/ Alfred G. Chiantelli
--------------------- ----------------------------
JUDGE OF THE SUPERIOR COURT
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<PAGE>
APPENDIX A
Dear Sir or Madam:
The enclosed check is a restitution payment from Providian. Please cash this
----------------
check as soon as possible. It will be void after 180 days from the date of the
-------------------------------------------------------------------------------
check.
------
This payment to you was made possible by the joint efforts of the Office of the
Comptroller of the Currency of the United States of America ("OCC"), the San
Francisco District Attorney's Office, and the California State Attorney
General's Office.
During 1999 and earlier this year, the San Francisco District Attorney
investigated the practices of Providian Financial Corporation, Providian Bank
and Providian Bancorp Services, and the OCC investigated the practices of
Providian National Bank. Both agencies determined that certain consumers may
have been harmed by those practices. Providian National Bank entered into a
Consent Order with the OCC. Providian Financial Corporation, the bank's parent
company, and Providian Bank and Providian Bancorp Services, entered into a
Stipulated Final Judgment with the People of the State of California.
As a result of these settlements, Providian agreed to make payments to consumers
who may have been harmed by its practices. Under the terms of the settlement,
you were identified as one of the consumers who are entitled to such a payment.
If you would like to review the OCC's Consent Order with the Providian National
Bank on the Internet, you will find it at www.occ.treas.gov, or you may receive
a printed copy of the Consent Order by sending $[ ] to [address]. You may review
the People of the State of California's Stipulated Final Judgment against
Providian Financial Corporation, et al., by contacting either the San Francisco
District Attorney's Office or the California State Attorney General's Office at
www.ci.sf.ca.us/da/ or www.caag.state.ca.us.
Sincerely,
________________________________ _________________________________
[Comptroller Representative] [District Attorney Representative]
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<PAGE>
APPENDIX B
Dear Sir or Madam:
As you may recall, several months ago you received a restitution payment from
Providian. That payment was made possible by the joint efforts of the San
Francisco District Attorney's Office, the California State Attorney General's
Office, and the Comptroller of the Currency of the United States of America
("OCC").
During 1999 and earlier this year, the San Francisco District Attorney's Office
investigated the practices of Providian Financial Corporation, Providian Bank
and Providian Bancorp. The OCC investigated the practices of Providian National
Bank. As a result of a settlement, Providian agreed to create a settlement fund
for consumers who were entitled to restitution because of those practices. You
were identified as one of the consumers who are entitled to restitution.
The enclosed check represents excess funds from the settlement fund, which have
been divided among consumers who received and cashed the first check. Please
------
cash this check as soon as possible. It will be void after 180 days from the
-----------------------------------------------------------------------------
date of the check.
------------------
If you would like to review the People of the State of California's Stipulated
Final Judgment against Providian Financial Corporation, et al., on the Internet,
contact either the San Francisco District Attorney's Office or the California
State Attorney General's Office at www.ci.sf.ca.us/da/ or www.caag.state.ca.us.
To review the OCC's Consent Order with the Providian National Bank on the
Internet, you will find it at www.occ.treas.gov, or you may receive a printed
copy of the Consent Order by sending $[ ] to [address].
Sincerely,
____________________________________ _____________________________
[District Attorney Representative] [Comptroller Representative]
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<PAGE>
TERENCE HALLINAN
District Attorney
DAVID A. PFEIFER, State Bar. No. 127785
Assistant Chief District Attorney
JUNE D. CRAVETT, State Bar No. 105094
Assistant District Attorney
732 Brannan Street
San Francisco, California 94103
Telephone: (415) 551-9537
BILL LOCKYER
Attorney General
HERSCHEL T. ELKINS
Senior Assistant Attorney General
SUSAN E. HENRICHSEN, State Bar No. 66174
IAN K. SWEEDLER, State Bar No. 169969
Deputy Attorneys General
110 West A Street, Suite 1100
San Diego, CA 92186-5266
Telephone: (619) 645-2081
Attorneys for Plaintiff, the People of the State of California
IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF SAN FRANCISCO
UNLIMITED JURISDICTION
------------------------------------------
THE PEOPLE OF THE STATE OF CALIFORNIA, Case No. 313230
Plaintiff, STIPULATION FOR ENTRY
OF FINAL JUDGMENT AND PERMANENT
vs. INJUNCTION
PROVIDIAN FINANCIAL CORPORATION, a
Delaware corporation; PROVIDIAN BANK, a
Utah corporation and PROVIDIAN BANCORP
SERVICES, a California corporation,
Defendants.
------------------------------------------
Plaintiff, the People of the State of California, appearing through its
attorneys Terence
<PAGE>
Hallinan, District Attorney of the City and County of San Francisco, by
Assistant District Attorneys David A. Pfeifer and June D. Cravett, and Bill
Lockyer, Attorney General for the State of California, by Senior Assistant
Attorney General Herschel T. Elkins and Deputy Attorneys General Susan E.
Henrichsen and Ian K. Sweedler, and defendants Providian Financial Corporation,
Providian Bank and Providian Bancorp Services (hereinafter "defendants"),
appearing through their attorneys Keker & Van Nest, L.L.P., by Robert A. Van
Nest and Jon S. Tigar, hereby enter into this Stipulation for Entry of Final
Judgment and Permanent Injunction as follows:
RECITALS
WHEREAS defendant Providian Financial Corporation is a Delaware corporation
that maintains its headquarters and principal place of business at 201 Mission
Street, San Francisco, California; that conducts business in the City and County
of San Francisco and throughout the State of California; and that has no offices
or employees located outside the State of California;
WHEREAS defendant Providian Financial Corporation is the sole shareholder
of its wholly owned subsidiaries, Providian National Bank, Providian Bank and
Providian Bancorp Services, a California corporation that also maintains its
principal place of business at 201 Mission Street, San Francisco, California;
WHEREAS plaintiff has filed a complaint against defendants alleging
violations of California Business and Professions Code sections 17200 and 17500;
WHEREAS defendants, in the interest of settlement and compromise, consent
to the entry of the Stipulated Final Judgment and Permanent Injunction; and
WHEREAS plaintiff has determined that the Stipulated Final Judgment and
Permanent Injunction, including the payment provisions, provides a suitable and
equitable resolution of the complaint on file in the action (hereinafter
"Complaint");
<PAGE>
STIPULATION
On the basis of the foregoing, the parties hereby stipulate and agree
as follows:
1. Defendants waive service of a summons and complaint in this action.
2. The proposed Stipulated Final Judgment and Permanent Injunction, a
copy of which is attached hereto as Exhibit A and incorporated herein by this
reference, may be rendered and entered as set forth therein, without the taking
of proof and without trial or adjudication of any fact or law, without the
Stipulated Final Judgment and Permanent Injunction constituting evidence or an
admission by defendants regarding any issue of law or fact alleged in the
Complaint, and without defendants admitting any liability.
3. Defendants each warrant and represent that it is a proper party to the
Final Judgment and Permanent Injunction.
4. Defendant Providian Financial Corporation warrants and represents that
it is the sole shareholder of Providian National Bank, Providian Bank and
Providian Bancorp Services, and that it has the authority to, and hereby does,
guarantee the compliance by its subsidiaries with the injunctive provisions in
the Stipulated Final Judgment and Permanent Injunction, and the satisfaction by
its subsidiaries of the monetary provisions of the Stipulated Final Judgment and
Permanent Injunction.
5. Each defendant represents and warrants that the execution and delivery
of this Stipulation for Entry of Final Judgment and Permanent Injunction is its
free and voluntary act and that the Stipulation for Entry of Final Judgment and
Permanent Injunction and the Stipulated Final Judgment and Permanent Injunction
are the result of good faith settlement negotiations.
6. The parties warrant that they will implement the terms of the
Stipulated Final Judgment and Permanent Injunction in good faith.
7. Plaintiff may submit the Stipulated Final Judgment to any judge of the
superior court for approval and signature, based on this Stipulation for Entry
of Final Judgment and Permanent Injunction, during the court's ex parte calendar
or on any other ex parte basis, without notice to or any appearance by any
defendant which notice and right to appear each defendant hereby waives.
<PAGE>
8. Each defendant waives any right to appeal, to attempt to set aside or
vacate, or otherwise to attack, directly or collaterally, the Stipulated Final
Judgment and Permanent Injunction entered pursuant to this Stipulation or any
provision contained therein.
9. Defendants will pay any fees charged by the superior court associated
with the filing of the Stipulation for Entry of Final Judgment and Permanent
Injunction.
10. The Stipulated Final Judgment and Permanent Injunction shall bar any
other action which the People of the State of California could have brought
against defendants based upon the facts alleged in the Complaint for acts
occurring prior to the entry of the Stipulated Final Judgment and Permanent
Injunction. The Stipulated Final Judgment is meant to resolve all matters set
forth in the allegations in the Complaint.
11. The parties represent and warrant that the signatories to this
Stipulation for Entry of Final Judgment have authority to act for and bind them.
12. Each of the undersigned representatives of defendants warrants that
the representative has been duly authorized by the defendant for whom the
representative appears to be acting to enter and execute this Stipulation for
Entry of Final Judgment and Permanent Injunction on behalf of that defendant.
13. This Stipulation for Entry of Final Judgment and Permanent Injunction
may be executed in counterparts and on multiple signature pages.
DATED: June 27, 2000 TERENCE HALLINAN
San Francisco District Attorney
By: /s/ David A. Pfeifer
----------------------------
David A. Pfeifer
Assistant Chief District Attorney
By: /s/ June D. Cravett
----------------------------
June D. Cravett
Assistant District Attorney
Attorneys for Plaintiff,
The People of the State of California
<PAGE>
DATED: June 26, 2000 BILL LOCKYER
Attorney General
By:/s/ Susan E. Henrichsen
--------------------------------
Susan E. Henrichsen
Deputy Attorney General
Attorneys for Plaintiff
Attorneys for Plaintiff,
The People of the State of California
DATED: June 26, 2000 PROVIDIAN FINANCIAL CORPORATION
PROVIDIAN BANK
PROVIDIAN BANCORP SERVICES
By:/s/ Shailesh Mehta
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Shailesh Mehta
Chairman and Chief Executive Officer
APPROVED AS TO FORM AND CONTENT:
DATED: June 24, 2000 KEKER & VAN NEST, L.L.P.
By:/s/ Robert A. Van Nest
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Robert A. Van Nest
Jan Little
Attorneys for Defendants,
Providian Financial Corporation,
Providian Bank and Providian
Bancorp Services
