-Caveat Lector- Providian is on the cutting edge of the credit card industry's 'bad habits.' "The question now is whether Providian can maintain its break-neck growth if it [doesn't deceive] in its marketing." CREDIT GIANT ACCUSED OF PILING ON CHARGES Employees say Providian urged them to mislead by Sam Zuckerman San Francisco Chronicle, June 1, 1999 Providian Financial Corp., the San Francisco credit card giant that is under investigation for possible unfair business practices, instructed its telemarketers to engage in high-pressure, misleading sales tactics, according to more than a dozen current and former employees who spoke to The Chronicle. Many complaints that have been lodged against the company involve the sale of add-on products -- such as credit insurance and memberships in auto clubs, buying clubs and discount drug plans -- to people who said they did not want them. "When I first started working there, I thought the company was doing good things for customers by helping them rebuild their credit," said Kim Williams, who worked for 1 1/2 years as a customer service representative in Providian's San Francisco headquarters. But Williams quit last year, in part because she felt bad about pushing products that she considered useless. "I never thought they were worth anything," she said. "I thought we were just bilking customers out of their money." Providian specializes in issuing credit cards to people other lenders had dismissed as deadbeats. Its cardholders include people who previously had trouble paying their bills, older people who never had credit cards before and widowed or divorced people without credit histories in their own names. The San Francisco district attorney's office is investigating Providian's sales and collection practices. A series of civil lawsuits charge the company with unfair and deceptive business practices. The Better Business Bureau has received 850 complaints from Providian customers nationwide. Among the gripes is that the company is slow to post customer payments, which generates late fees. From 1996 to 1998, Providian's revenues from late and over-limit charges, add-on products, and other customer fees grew 470 percent to $703.5 million, while total revenues grew only 120 percent, to $2.4 billion. In response to the criticism, Providian stresses that it obeys all consumer laws and regulations, and guarantees its customers "100 percent satisfaction." "We help people to build, protect and responsibly use credit," said company spokesman Marc Loewenthal. Providian wants "an active and lasting customer relationship," he said. 'ENHANCED CUSTOMER SATISFACTION' Last week, after Providian's stock had fallen by one-third on news of the district attorney's investigation, Providian announced an "enhanced customer satisfaction program." Among other steps, Providian said, it will reverse late fees and cancel sales of add-on products if consumers had not intended to buy them. It also hired Ernst & Young to review its payment processing procedures. The company said its actions were not an admission that it had deceived customers. Its stock rose 15 percent after the announcement. MAINTAINING GROWTH The question now is whether Providian can maintain its break-neck growth if it reins in its marketing. "Their whole way of selling was to mislead the customers," said Linda Sherry of the San Francisco advocacy group Consumer Action. "If they were to clean up the act, they might not sell as much." Jack Weiss, a 72-year-old San Francisco printing salesman, said he got a credit card from Providian in 1996, although he never bought anything with it. In 1997, Providian sent him an unsolicited membership in its DrivePro auto club. "They sent me this DrivePro card that I didn't ask for and charged me $99 for it," said Weiss, who was already a member of another auto club. Weiss said he called and wrote Providian, but was unable to get the charge reversed. Meanwhile, he was racking up late fees on the money Providian said he owed for DrivePro. Weiss tried to cancel his credit card account, he said, but the company continued to bill him for his outstanding balance. Finally, it hired a collection agency. "My experience with them was dreadful," he said. Providian said it could not discuss Weiss' case because of privacy rules. PRESSURE TO SELL Current and former Providian employees who spoke with The Chronicle said they were under fierce pressure to sell add-on products, especially "credit protection." "That was our big moneymaker," said one former customer service specialist who asked not to be identified. "The amount sold was tremendous, and the claims on it were so few." Many credit card companies sell credit insurance, which provides benefits to cardholders who become disabled or unemployed. Most programs pay the customer's minimum payment and let them continue to use the card. But Providian's program merely freezes the balance -- making no payments -- and disallows further use of the card. Meanwhile, Providian's monthly charge for the product, commonly 79 cents for every $100 of balance, is among the highest on the market, according to Consumer Action. "Credit insurance is one of the most overpriced rip-off products in the marketplace," said Ed Mierzwinski of U.S. Public Interest Research Group in Washington, D.C. "Providian has invented a product that's even worse." Providian's Loewenthal said that the company's credit protection ensures that customers do not get a negative report on their credit record and that some customers would not be eligible for credit at all if they did not buy protection. The company's telemarketers sold the product by reading from a script, which was worded in a way that made many customers think that they were merely requesting information when actually they were signing up for the product. "If they say, 'Yes, send me the information,' you hit 'Yes' and it's automatically (charged to) the account," said Samara Alharby, 21, who recently lost her job working on overdue accounts at Providian's Sacramento office. "I was required to sell credit protection even to people who were over their credit limit," Alharby said. Although telemarketers earned wages, not commissions, they received bonuses for meeting quotas and could be disciplined or fired if they fell short. To make quotas, some salespeople gave short shrift to disclosure, Providian employees said. "The telemarketers were reading through the scripts really fast," said one former employee who monitored marketing calls. "The customers didn't know what they were talking about." INUNDATED WITH COMPLAINTS Five current or former customer service representatives said they were inundated with complaints from cardholders who ended up with credit protection that they never wanted. A collection specialist in the company's Fairfield offices estimated that 25 percent of the calls she handled involved complaints that credit protection was sold deceptively. "I'd ask, 'Did you approve the addition of credit protection?' and they would say, 'No, I just asked for information.' " Loewenthal said the company makes sure all telemarketing scripts obey the law. Salespeople are regularly monitored to make sure they stick to scripts, he said. Current and former Providian employees said they were not directly aware of telemarketers who did not read disclosures or sold products to people who specifically had declined them, which would violate the law. But several said they suspected such activities did take place because of the large number of customers who insisted that they had never agreed to buy products. Several former employees said they suspected certain telemarketers in Providian's Kentucky call center made such improper sales because of a high volume of customer complaints. "We would tell (managers), 'This is what's going on in Kentucky,'" said Williams. Providian spokeswoman Laurie Cole said any telemarketer who was found not to have read disclosures would be disciplined and retrained, and fired if they repeated the offense. Any employee who sold products without customer authorization would be fired immediately, Cole said, although she declined to say how often such sanctions were imposed. 'AGGRESSIVE IN MARKETPLACE' Providian's Wall Street fans describe the company as a hard-charging but sophisticated organization that is scrupulous about not crossing the line into illegal activity. They say the company is bound to generate a larger-than-average number of complaints because it is dealing with many customers who have had credit problems. "The company has always been aggressive in the marketplace. But have they done anything illegal? I doubt it," said Merrill Lynch analyst Michael Hughes. Providian, of course, is far from the only credit card company criticized for unfair business practices. Many card issuers have recently raised fees for late payments and exceeding credit limits, generating howls of protest. DISCLOSURE LEGISLATION Congress is considering legislation that would toughen credit card disclosure requirements, a measure the industry bitterly opposes. Still, Providian is "on the cutting edge of the industry's bad habits," said PIRG's Mierzwinski. The company changed its name from First Deposit in 1994. Three years later, it was spun off its parent, a Kentucky insurance company, and became an independent, publicly traded company. Providian's most aggressive growth, and most of the consumer complaints, have come since the spin-off. Although some of its customers have good credit records, much of the company's success came from its proprietary formula for pinpointing customers who had past credit problems but were still likely to pay back debts. Today, Providian is the nation's ninth-largest credit card company with a stock market value of $13.7 billion. DECLARATION & DISCLAIMER ========== CTRL is a discussion and informational exchange list. Proselyzting propagandic screeds are not allowed. Substance—not soapboxing! These are sordid matters and 'conspiracy theory', with its many half-truths, misdirections and outright frauds is used politically by different groups with major and minor effects spread throughout the spectrum of time and thought. That being said, CTRL gives no endorsement to the validity of posts, and always suggests to readers; be wary of what you read. CTRL gives no credeence to Holocaust denial and nazi's need not apply. Let us please be civil and as always, Caveat Lector. ======================================================================== Archives Available at: http://home.ease.lsoft.com/archives/CTRL.html http:[EMAIL PROTECTED]/ ======================================================================== To subscribe to Conspiracy Theory Research List[CTRL] send email: SUBSCRIBE CTRL [to:] [EMAIL PROTECTED] To UNsubscribe to Conspiracy Theory Research List[CTRL] send email: SIGNOFF CTRL [to:] [EMAIL PROTECTED] Om