Providian
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| Providian Financial Corporation | |
| Type | Defunct; formerly Public (NYSE: PVN) |
|---|---|
| Founded | 1997 |
| Headquarters | San Francisco, California |
| Key people | Joseph W. Saunders, Chairman, President, & CEO Anthony F. Vuoto, Vice Chairman & CFO Warren Wilcox, Vice Chairman of Planning and Marketing |
| Industry | Finance and Insurance |
| Products | Financial Services |
| Revenue | $2.6 billion USD (2004) |
| Employees | 3,500 |
| Slogan | Providing More |
| Website | www.providian.com |
Providian Financial Corporation was one of the leading credit card issuers in the United States. It was headquartered in San Francisco, California, Providian had more than 10 million card holders and was ranked as the ninth largest credit card issuer. In October, 2005 Providian was sold to Washington Mutual for approximately $6.5 billion. Washington Mutual will run the company as a wholly owned subsidiary, continuing to operate out of its San Francisco headquarters. The company employed approximately 3,000 employees nationwide. Providian had significant operations in California, New Hampshire, and Texas.
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[edit] History
In 1984 Andrew Kahr founded a credit card company called First Deposit Corp. [1]
Providian was a company that sold credit in the "subprime market." People in that market are those who can't get credit cards from the major companies. They are people with low incomes and bad credit histories. Providian was providing financial solutions to the lowest income group, by permitting them to get credit at high interest rates. The annual percentage rates (APR) charged by Providian was as high as 29.9 percent.
In a March 1999 memorandum published by the San Francisco Chronicle, the founder of the company, Andrew Kahr, asked company executives about its customers: "Is any bit of food too small to grab when you're starving and when there is nothing else in sight? The trick is charging a lot, repeatedly, for small doses of instrumental [sic]credit." Many critics contended that, the extended credit makes the borrower poorer than before the credit was extended, it had the opposite effect on officers and directors of the company. It made them conspicuously wealthier. David Alvarez, former president of the integrated-card unit made a $12.2 million profit selling his stock before the company disclosed that it was in deep trouble. Larry Thompson sold all his stock having a value of approximately $4.7 million following his confirmation hearing and a short time before Providian's financial problems became public information and the stock price plummeted.
[edit] Class Action Suit
Beginning in mid-1999, a number of class-action suits were filed against the company regarding aggressive sales tactics for various "credit protection" services being sold to Providian credit card holders.
On November 7, 2001, the Hon. Stuart R. Pollak of the Superior Court of California, the City and County of San Francisco, granted final approval to a settlement agreement in the case, and certified a settlement class. The settlement required Providian to pay over $100 million in cash, credits, and other benefits to the Class, and to stop certain practices that were at issue in the class actions. Combined with an earlier settlement with governmental entities, the award constitutes the largest settlement ever against a credit card company for alleged widespread unlawful business practices.
[edit] Turn Around
Providian underwent a tremendous business turnaround beginning in 2001 following the departure of the former management team and large credit losses following the recession of 2001. These losses led to significant layoffs, trimming the company from 11,000 employees to 3,500. During the same period, the size of the credit portfolio and the number of accounts decreased significantly, as the new management team sold a large number of higher credit risk accounts and began a marketing program that reinvented the Company. Under the leadership of CEO Joe Saunders and his management team, the company has very successfully focused on attracting “mainstream” American customers, while dramatically reducing its credit losses.
As of October 1, 2005, Providian is now a part of Washington Mutual. Providian has been renamed Washington Mutual Card Services, and currently markets cards under the Washington Mutual name, as well as issues co-brand and affinity cards entities including ESPN, HSN, and the Democratic National Committee.
