Providian to Pay Fine in Dispute Over Late Fees

Providian Financial Corp. said Monday that it had agreed to pay $1.6 million to settle consumer complaints in Connecticut about erroneous late fees on its credit cards and other alleged abuses.

San Francisco-based Providian, the biggest U.S. issuer of cards to consumers with tarnished credit, also agreed to make restitution to cardholders hit with improper late fees and other charges, the Connecticut attorney general’s office said.

Connecticut officials began investigating Providian’s credit practices in the wake of a San Francisco district attorney’s probe 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.

The Connecticut settlement is the first spawned by the litigation.

“The settlement imposes far-reaching reforms that provide a road map to safeguard consumers in other cases,” said Connecticut Atty. Gen. Richard Blumenthal.

Providian officials said the San Francisco investigation and private consumer lawsuits over the disputed credit practices are not covered by the settlement.

Providian, the sixth-largest U.S. credit card issuer, said in October that a computer programming error had resulted in “erroneous” late fees charged to customers over several months. The company fixed the problem and vowed to make $20 million in refunds.

Providian’s shares rose 81 cents to close at $93.72 on the New York Stock Exchange.

Providian also agreed to credit payments on the date they are received to avoid generating late fees. It also will notify credit-reporting services of erroneous fees to have them removed from consumers’ credit histories.