# O

+-----------------------------------------------------------------------+
| ## Comptroller of the Currency                                        |
|                                                                       |
| > Administrator of National Banks                                     |
+-----------------------------------------------------------------------+

Washington, DC 20219

June 29, 2000

#### **Fact Sheet**

The following are examples of unfair or deceptive practices which the
OCC believes Providian National Bank engaged in. While the bank did not
admit or deny wrongdoing, it entered into a consent order which
addresses these programs and others.

##### Guaranteed Savings Rate (GSR) program

Providian encouraged consumers to transfer accounts to the bank by
telling them that they were guaranteed a lower credit card rate than
they were currently paying. The telemarketers who sold this program used
terms like "great savings" and "maximum savings, " but refused \-- as
they had been instructed \-- to answer questions about how great the
savings would be.

Instead, in response to the question of how much money would be saved,
the telemarketers used scripts that directed them to say:

What we will do is beat what you are currently paying in interest.
Basically, just show us the regular, non-introductory rates you're
paying for the balances you've transferred, and we'll combine this
information to get the actual cost you're paying in interest - and beat
it! So, you'll have a lower overall rate!!

If the consumer pressed the question, the telemarketer was directed to
say:

You are in control . . . that is why this account can really save you
money! Because your long term rate is determined by the information [you
send us]{.underline} showing the regular non-introductory rates you're
currently paying on the balances you transfer.

When further pressed, the telemarketer was directed to say:

> Well, Mr./s under our Guaranteed Saving Program, what we do is
> determine the [true cost]{.underline} of what you are paying in
> interest and we beat it. That's why we've had such an overwhelming
> response to this account.

If the consumer persisted, the telemarketer was told to say:

Simply show us the regular, non-introductory rates you're paying for the
balances you've transferred and we'll combine this information to get
the actual cost you're paying in interest \-- and beat it! So, you have
a variable rate that beats what you are paying now! (Sounds good,
doesn't it!!)

No matter how hard the consumer pressed, the telemarketer, as directed
by the bank, never told the consumer that the maximum saving over the
rate the consumer had been paying was 0.7 percent in one rollout and 0.3
percent in another.

In addition, after the account was transferred to Providian, customers
who were dissatisfied with the rate reduction were required to pay a 3
percent "balance transfer fee" to move their funds to another
institution.

In addition, in order to receive the GSR program's 0.3% - 0.7% savings,
the consumer was required to "prove up" what their interest rate at the
other credit card company was. The consumer was given 90 days to offer
proof of their old rate, and if Providian was not satisfied with the
proof, the bank charged the highest rate permitted under the account
agreement \-- often 21.99 percent. This was ordinarily more than the
consumer was paying prior to transferring balances to Providian.

Moreover, if the consumer did not successfully prove their interest rate
to the satisfaction of Providian, the bank, by written policy, waited
until the 70^th^ day to inform the consumer. This, of course, greatly
diminished the consumer's opportunity to "prove up" their rate.

**[Credit Protection (CP)]{.underline}**

The bank marketed credit protection (CP) as a great way to avoid having
to make payments when hospitalized or out of work for up to 18 months.
As part of the program, no interest was to be charged to the consumer
during that period, and no adverse credit reports were to be filed.
However, in marketing this program, the bank did not adequately disclose
the following significant restrictions to the CP program:

-   CP coverage was limited to the number of months that the consumer
    paid in, even if that was less than the 18 months touted by the
    telemarketers;

-   CP was unavailable with regard to involuntary unemployment unless
    the consumer had paid in three months of premiums.

-   CP was unavailable with regard to involuntary unemployment if the
    consumer were self-employed.

-   CP was unavailable with regard to hospitalization, sickness or
    disability caused by a pre-existing condition unless the consumer
    had paid in six months of premiums.

-   CP could be denied if the consumer's account were not current.

-   CP could be denied if the consumer's account were over-limit.

-   CP could be denied if the consumer paid more than the minimum to
    another credit card account, beside Providian's.

-   CP could be denied if the consumer accessed credit from another
    credit card beside Providian's.

When consumers asked for literature on CP prior to signing up for it,
Providian, through its telemarketers, refused to supply such information
to the consumers.

##### "No Annual Fee" credit cards

In marketing this product, the bank did not adequately disclose that,
although there was technically no annual fee, the consumer was required
to purchase Credit Protection at \$156 a year. If, after receiving a
bill for the Credit Protection, the consumer complained, the bank
informed the consumer that the Credit Protection was mandatory. If the
consumer insisted that they did not want the Credit Protection, the bank
informed the consumer that the only alternative was for the consumer to
pay an Annual Fee. Thus, in order for the consumer to receive a card
with no Annual Fee, the consumer had to pay for even more expensive
Credit Protection.

Nowhere on the face of the solicitation letters did Providian disclose
the fact that the purchase of Credit Protection was mandatory for the
"No Annual Fee" credit card. Nowhere on the Application Form did
Providian disclose the fact that the purchase of Credit Protection was
mandatory. Rather, the bank indicated that Credit Protection was
"included" with the card.

##### "Real Check" program

Providian marketed a program entitled "Real Check" in which the bank
enticed consumers to open a credit card account with a promise of a
"reward' of up to \$100 in one instance and \$200 in another instance.
The bank, however, did not adequately disclose to consumers that they
not only needed to transfer an outstanding credit card balance to
Providian, they also needed to transfer a certain minimum balance, in
order to get the full reward. In the case of the \$200 reward, consumers
were required to transfer a balance of a minimum of \$10,000.