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Providian Stock Falls on News of Probe

Consumers: Shares drop 14% after San Francisco district attorney's office says it will look into fraud allegations against credit card issuer.

May 20, 1999| From Bloomberg News

Shares of Providian Financial Corp., the biggest U.S. issuer of credit cards to consumers with tarnished credit records, fell 14% after the San Francisco district attorney's office said it was investigating the company for possible consumer fraud.

Providian, in its biggest decline in seven months, fell $17.19 to close at $106.94 on the New York Stock Exchange. Earlier, it fell to $103.13. The stock had gained 66% this year before Wednesday's drop.

The district attorney's office, responding to consumer complaints, is looking into the way San Francisco-based Providian markets credit cards and collects debt, said Clarence Johnson, a spokesman for the office.

"We haven't formed any conclusion about whether the complaints are valid. We're miles away from doing that," he said.

Providian will "cooperate fully" with the investigation, said Laurie Cole, a company spokeswoman. "We're confident we're in compliance with applicable laws and regulations."

Consumer advocacy groups in the San Francisco area have heard gripes from consumers about Providian. The complaints concern allegedly deceptive credit card solicitations, rates being changed without notice and payments not being posted on time, officials of the groups said.

"We have gotten quite a few complaints about them," said Linda Sherry, editorial director with Consumer Action, a 27-year-old San Francisco organization that publishes an annual credit card pricing survey.

Providian has "an unsatisfactory record," according to the Oakland Better Business Bureau. The company has "generated a pattern of complaints," according to an audio report the bureau makes available over the telephone.

The district attorney's investigation was first reported by the San Francisco Chronicle.

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