Updated from 2:13 p.m. EDT
agreed Wednesday to pay at least $300 million to settle an investigation of its credit card marketing practices.
Office of the Comptroller of the Currency
, a federal agency that has investigated the credit card issuer in tandem with Terence Hallinan, the San Francisco district attorney, said the company would pay in excess of $300 million.
Konrad Alt, the company's public policy officer, said, "We currently estimate the settlement at very slightly over $300 million."
The restitution payment would be the largest enforcement action ever taken by the federal agency, established in 1863 as a bureau of the
U.S. Department of the Treasury
. The company, which admitted no wrongdoing, also will pay a $5.5 million civil fine to the San Francisco District Attorney's office and alter its business practices.
"We found that Providian engaged in a variety of unfair and deceptive practices that enriched the bank while harming literally hundreds of thousands of its customers," Comptroller of the Currency John D. Hawke said in a statement.
The investigation followed consumers' complaints that the company misled them about rates and fees, changed rates without notice and delayed posting payments to fraudulently create late fees.
The sixth-largest U.S. credit card issuer, Providian aims at consumers with tarnished credit histories.
"We've already instituted a number of measures that have greatly enhanced our customer satisfaction and quality control programs," Shailesh Mehta, the company's chairman and chief executive, said in a statement. "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."
Providian shares settled up 2, or 2%, to 85. They closed above 123 on May 18, the day before the district attorney's investigation was reported by
of San Francisco.
On June 20, Providian said it expected to take a one-time charge that could decrease its annual operating earnings by $1.12 to $1.22 a diluted share, or $159.6 million to $173.8 million, based on 142.5 million shares outstanding, the figure given in the company's most recent filing with the SEC. The settlement could reach more than $300 million, the
San Francisco Chronicle
reported at the time. The newspaper did not say whether that figure would include taxes.
The $300 million figure is pretax. After taxes, the settlement will cost around $160 million, Alt said Wednesday, confirming the range reported last week by
That announcement came less than a day after the company, in another case, agreed to pay $1.6 million to settle a lawsuit by the state of Connecticut that accused it of charging for unauthorized services and inadequately disclosing certain fees. The Connecticut settlement was the first spawned by the litigation.
Connecticut officials began investigating Providian's credit practices after the San Francisco district attorney began its inquiry into the company's handling of late fees and allegedly misleading marketing techniques to lure consumers to buy things such as credit insurance on the cards.
Excluding the Connecticut settlement and the expected San Francisco settlement, earnings for the year will be $5.10 to $5.20 a diluted share, the company said. Including the charges and a 26-cent-a-share gain from selling home equity loans, earnings will be $4.24 to $4.34 a share, the company said. For the second quarter, earnings will range from $1.25 to $1.30 a share excluding the one-time items and 39 to 44 cents a share including them.
Providian went public in 1997, taking the name of its former parent, a Kentucky insurance company that spun off its consumer finance unit.