EXHIBIT 99
PROVIDIAN FINANCIAL CONCLUDES ANTICIPATED SETTLEMENT WITH THE OCC, SAN FRANCISCO
DISTRICT ATTORNEY'S OFFICE AND CALIFORNIA ATTORNEY GENERAL
Resolution Strengthens Company's Ongoing Commitment
and Focus on Customer Satisfaction
SAN FRANCISCO, JUNE 28, 2000 -- Providian Financial Corp. (NYSE: PVN) today
announced it had reached a final settlement agreement with the Office of the
Comptroller of the Currency (OCC), the San Francisco District Attorney's office
and the California Attorney General, ending their inquiries into the Company's
business practices. Under terms of the agreement, and without admitting any
wrongdoing, Providian agreed to make certain business practice changes and to
pay a one-time restitution of approximately $300 million. Providian will also
pay a $5.5 million civil fine to the San Francisco District Attorney's office.
In announcing the formal settlement, Company Chairman and Chief Executive
Officer Shailesh Mehta indicated that Providian was pleased to have put this
issue behind it.
"We've already instituted a number of measures that have greatly enhanced our
customer satisfaction and quality control programs. When combined with the
enhancements that are a part of this settlement, these changes will create a
company that stands at the forefront in customer communications, satisfaction
and experience," said Mehta.
As previously announced by the Company, the settlement and other one-time events
will result in a net charge to second quarter earnings. Consistent with its
previous announcement, the Company anticipates earnings per diluted share to be
in the range of $0.39 to $0.44 for the second quarter, and $4.24 to $4.34 for
2000. Without the one-time net charge, the Company continues to anticipate
earnings per diluted share of $1.25 to $1.30 for the second quarter and $5.10 to
$5.20 for 2000. The Company reiterated its goal of achieving long-term
earnings-per-share growth of 25% based on its earnings guidance exclusive of
these one-time events.
The two key elements of the settlement agreement are changes to business
practices and restitution to customers.
Business Practices
The Company has set for itself the goal of achieving best-in-class customer
service and satisfaction and believes the changes it has agreed to make, as part
of the settlement, fully support that goal. In the course of its year-old
customer satisfaction initiative, the Company has already implemented many of
the required changes.
Since its launch in May of 1999, Providian's enhanced customer satisfaction
initiative has led the Company to adopt numerous sales and service changes to
increase customer satisfaction. For example, Providian has extended the grace
period for late payments, clarified its telephone scripts and direct mail
solicitations and implemented digital recording of all outbound sales calls.
Similarly, the Company has established a "mystery shopping" program to provide
independent evaluations of customer service, strengthened its 30-day money-back
guarantee and instructed all Providian representatives to end their calls by
asking the customer, "Are you satisfied?"
Restitution
The majority of the payments to customers relate to sales and marketing
practices the Company used in connection with two products: Guaranteed Savings,
which was sold in the Company's Platinum card business, and Credit Protection,
which is sold in all card business lines. The company will also make payments on
earlier purchases of other membership products.
Guaranteed Savings was a balance transfer program in which Providian set the
interest rate based upon the competing rates on balances transferred from other
credit cards held by the consumer. Restitution paid from this program addresses
claims related to the company's disclosure of associated interest rates. The
Company decided earlier this year to discontinue this program.
The Company's Credit Protection product is a payment suspension program that
allows customers to suspend payments, and have no interest accrue, on their
Providian credit cards if they experience certain life events, such as
hospitalization, disability or loss of employment. Many issuers currently offer
similar products. The Company has agreed to improve its sales process further,
for example, by giving prospective purchasers of the product a complete written
description of the terms and conditions before finalizing sales.
"One year ago, this company got a wake up call," said Mehta. "Today, we are
emerging as a stronger and more customer-focused company. We have improved
customer retention, achieved high levels of customer satisfaction as measured by
independent researchers and been rewarded by earning the business of more than
four million new customers. We plan to build on this momentum to ensure that
Providian is a world-class business in every respect."
About Providian Financial Corporation
San Francisco-based Providian Financial Corporation (www.providian.com) is a
leading provider of lending and deposit products to customers throughout the
United States and offers credit cards in the United Kingdom. The sixth largest
bankcard issuer in the U.S., Providian was recently named one of America's Most
Admired Companies by Fortune magazine. Providian serves a broad, diverse market
with loan products that include credit cards, secured cards and membership
products. With a commitment to 100% customer satisfaction, Providian's mission
is to help customers build or rebuild, protect and responsibly use credit by
providing a quality borrowing experience that leads to active and long-lasting
customer relationships. Providian has more than $26 billion in assets under
management and over 13 million customers.
Statements contained herein as to the Company's expectations and goals are
forward looking statements under the Private Securities Litigation Reform Act of
1995. Such forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
projected. Among the significant risks and uncertainties are: competitive
pressures arising from aggressive competition from other consumer lenders;
factors that affect the delinquency rate on the Company's consumer loans and the
rate at which the Company's consumer loans are charged off; changes in the cost
and availability of funding due to changes in the deposit market, credit market
or securitization market, or the way in which the Company is perceived in such
markets; the effects of government policy and regulation, including restrictions
and/or limitations arising from banking laws, regulations and examinations;
legal proceedings; and the ability to attract and retain key personnel. More
information on risk factors affecting the Company is available in the Company's
filings with the Securities and Exchange Commission, including its annual report
on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K.
*Note - An overview of the settlement agreement is attached and can be found on
our Web site at www.providian.com
For additional information:
Investors Media
Nancy Murphy Alan Elias
415.278.4483 415.278.4189
Jack Carsky
415.278.4977
Bill Horning
415.278.4602
Settlement Overview
Under terms of the settlement, Providian Financial Corp. and certain of its
subsidiaries (Providian National Bank, Providian Bank and Providian Bancorp
Services) have agreed to make restitution to certain customers and to modify
certain sales and marketing practices. The Company has previously implemented
many of the required changes in marketing practices. Neither the Company nor any
of its subsidiaries has admitted any wrongdoing.
Prospective Relief
The settlement affirms many of the Company's existing policies and practices,
including some the Company has recently adopted in the course of its year-long
enhanced customer satisfaction program, such as payment posting and fee reversal
policies, and others the Company has followed for years. In addition, the
settlement requires the Company to adopt a number of improvements to its sales
and operations practices, product and sales disclosures and membership products.
The settlement requires the Company to provide customers with enhanced
disclosures should it ever reintroduce any of several discontinued products,
product features and underwriting practices, including its Guaranteed Savings
and "Real Check" programs, certain "No Annual Membership Fee" products, home
equity loans and the use of income-to-debt ratios in performance-based pricing.
With respect to the Company's Credit Protection product, the settlement requires
the Company to modify its sales process by, for example, providing consumers a
complete written description of product terms and conditions before finalizing a
sale, rather than providing materials during the thirty-day cancellation period
after the sale.
The settlement also affirms a number of enhancements the Company has voluntarily
made to its membership products and membership product sales practices, such as
improvements in its disclosures of applicable charges. Additionally, the
settlement requires the Company to further enhance its sales practices by, for
example, including written notice of a consumer's right to cancel in its product
fulfillment materials and by archiving recorded customer communications for an
extended period of time. The Company has also agreed to include a written notice
of its cancellation policy in the first billing statement after each purchase.
In the past year, the Company has clarified disclosures made in the course of
balance transfer requests and heightened its standards for affirmative customer
consent. The settlement leaves these improvements intact and, in addition,
requires certain technical changes to the Company's balance transfer sales
process such as the inclusion of additional statement disclosures concerning
product charges and customer cancellation terms.
Restitution
Under terms of the settlement, the Company will make payments to customers for
fees and interest charged on certain products offered between June 15, 1995 and
June 28, 2000. The Company will establish a reserve estimated at approximately
$300 million. The Company will make payments from the reserve to qualifying
customers, many of whom participated in two programs: Guaranteed Savings, which
was sold in the Company's Platinum card business, and Credit Protection, which
is sold in all card business lines. The Company will also make payments to
customers who purchased other membership products by telephone and who cancelled
or sought to cancel the product(s) within four months of the date their monthly
statement first reflected a charge for it.
Guaranteed Savings Rate Program
Beginning in 1995, the Company offered its Platinum customers a Guaranteed
Savings Rate (GSR) program. Under this program, the Company offered certain
balance transfer customers an introductory rate for a period of time, usually
three months. After the introductory period, the Company offered the customer a
customized interest rate of 30-70 basis points below the weighted average
non-introductory rate the customer had been paying to other credit card
providers on transferred balances, contingent upon the customer's submission of
proof of the rates previously paid on those balances. The Company stopped
offering the GSR program in connection with new account originations during the
first quarter of 2000 and is now in the process of replacing the GSR offering
for existing customers.
The settlement also seeks to address claims that the Company may not have made
adequately clear to GSR customers the interest rates they would pay following
the conclusion of the introductory period. Accordingly, the settlement requires
the Company to make payments to GSR customers based on the balances they carried
during the nine-month period following the introductory rate, the rates they
were paying on those balances prior to transfer and the proof they submitted to
the Company to verify those rates. These customers will also receive interest on
these payments at an annual rate of 10%.
Credit Protection
Since 1987, the Company has offered a payment suspension product called Credit
Protection. Credit Protection allows customers, in exchange for a fee, to
suspend payments and interest on their credit cards, upon the occurrence of
certain life events, such as hospitalization, disability or loss of employment.
Many issuers offer similar products. The Company has always offered Credit
Protection with a full 30-day money back cancellation guarantee.
Under the settlement, the Company will make payments to all Credit Protection
customers who cancelled or sought to cancel the product within four months of
the date their monthly statement first reflected a charge for it (except to
whatever extent those customers may have previously received refunds upon
cancellation.) The Company has also agreed to make payments to customers who, in
certain specific circumstances, were denied a claim to activate Credit
Protection or whose benefits were limited.
Other Restitution
As noted, the Company has also agreed to make payments to customers in
connection with certain other product promotions, such as its discontinued Real
Check promotional offer. The Company will also make payments to limited numbers
of customers, if any, who may have incurred over-limit fees in using pre-printed
Cash Advance checks or received inadvertent performance-based rate increases as
a result of systems limitations.
DISCLAIMER
This summary is intended to provide an overview of the settlement's key
provisions. In preparing this summary, a good faith effort has been made to
summarize accurately the provisions of complex legal documents. The summary
should not be relied on as a definitive statement of the terms of the
settlement. For a definitive statement of the terms of the settlement, the
reader is referred to the Consent Order and the Stipulated Final Judgment and
Permanent Injunction.
