Is Providian going belly up?

Discussion in 'Credit Talk' started by bbauer, Oct 24, 2001.

  1. bbauer

    bbauer Banned

    Well, I don't know the answer to that one, but that's the rumors I am hearing.
    I've spoken about this customer of mine out in Oregon who got sued by First Select over a Providian account she faulted on before and she is the one who told me that she had heard that rumor.

    She used my suggestions on how to defend herself and as soon as she started aggressively applying them, they turned tail, dismissed the lawsuit and started running for the tall timber.

    So if Providian does go belly up which seems a resonable possibility due to their latest Wall Street problems plus the millions of dollars they have apparently had to spend defending class action lawsuits, we are going to see another X.Com fiasco where NCO will most likely get involved and buy them out for pennies on the dollar if that then go after everybody putting hickeys on their credit reports and generally screwing things up for everybody.

    If there seems any likelyhood that Providian might go belly up, it would be a fairly good idea to pay only the minimums on the card and build the balance as high as possible until we see if they do go belly up then sit back and wait for NCO or whoever buys their old debts to come charging after us and then make NCO pay the fiddler as well. Double payday that way.

    Looks like NCO has just flubbed the dub too. I see I just got a new hickey on my credit reports from them for just exactly the amount of my old X.Com account which they agreed in writing to remove posthaste. If that turns out to be the case, I'm really gonna put the blocks to those birds. Not likley they would have two accounts for exactly the same amount from different creditors, so it's a pretty safe bet I'm gonna have a very negative effect on their bottom line before this little party is over. Breach of written contract, maybe fraud, who knows yet where I might be able to take this one.

    Sure gonna be fun finding out.
  2. Momof3

    Momof3 Well-Known Member

    Will providian go belly up who knows?? But I doubt that NCO or someone similiar will take over. Providian has too many account holders. I would think one of the bigger and more powerful and more well managed banks will take over. Rumor has it Citi was looking into.

    But as far just paying you min payments and hoping to get your debts cleared, that's not why most of us are here...................
  3. breeze

    breeze Well-Known Member

    Anticipating the fact that providian might sell off some of their receivables, I paid off the tiny little balance I had (I used it to get higher limits to improve ratios).

    But I wouldn't speculate what the outcome will be. They could get bought out, they could reorganize, they could come up with some innovative way out of their current dilemma. Have to wait and see.

    Bill, for an old codger, you like living on the edge.
  4. bbauer

    bbauer Banned

    That's not "living on the edge" at all. In fact, I'm beginning to believe that paying the minimums or at least maintaining a hefty balance on cards can lead to much better deals on your credit cards. Here is why.

    I've always paid all my cards off in full each month, and my wife has a single CapOne with a $300 limit. She hasn't always paid it off in full by a long ways. Seldom paid it in full as a matter of fact because her small beauty shop hasn't always let her do that yet.

    CapOne is wetting their pants trying to get her to take a platinum, supposedly with a high limit like maybe $5,000 they are suggesting, and they never have sent me such an offer. I pay mine in full and she don't and gets better offers than I do. Go figure.

    So maybe not paying Providian more than the minimums right now just might not be so dumb after all. Seems I'd win either way. If they pull out, maybe I'll get higher limits offers and if they don't, Oh well. Sure I'll pay some interest, but if you wanna dance, you gotta pay the fiddler.
  5. breeze

    breeze Well-Known Member

    Yes, I agree, carrying a balance will get you better deals. Carrying to much in balances can get you no deals and bad terms.

    It sounded to me like you were saying run up a big balance, in anticipation of the accounts being sold to someone (collection agency/accounts receivable manager) so they would fall under FDCPA, so you could force them to "eat the debt" and get out of paying. That's why I said you were living on the edge.
  6. bbauer

    bbauer Banned

    No, Breeze, not at all. Running up a big balance in anticipation of them going belly up would really be living dangerously as well as being stupid to say the least.

    It would be an intentional fraud even if they couldn't prove it and if they pulled out of their present problems and survive as they may very possibly do, you would likely be in a bad debt situation you might have difficulty pulling out of and which would cost you a bundle in interest if you couldn't pay off in a hurry.

    That would not be a good bet to make at all. One would not want to continue to make only minimum payments for more than maybe 2 months. If they had not gone belly up in 2 months time, you would want to go ahead and get the cards paid off or the balance reduced, whatever you were doing before you started making the minimums in anticipation of the problems that might arise.

    But going out and running up the cards deliberately hoping they would go belly up???? I'm not that stupid yet. (LOL)
  7. keepmine

    keepmine Well-Known Member

    Providian is a bank. They won;t go belly up. I believe within 90-120 days they will be in FDIC receivership and their assets will be taken over by another subprime lender. I kinda doubt that Citi has any interest. There experience with The Associates hasn't been pleasant.
  8. sam

    sam Well-Known Member

    No providian is going to jack everyones rate up to 29% and revoke the grace period, and pull out of this slump!!

  9. Hal

    Hal Well-Known Member

    I think calling Providian a "Bank" is questionable, although in the strictest terms it may qualify, and I am sure has to for FDIC coverage. They have no substantial "bricks and mortar" locations as a true bank does, at least not to my knowledge.

    Should they go into FDIC receivership this is exactly what going belly up means - they will cease to operate as a bank and their deposits will transfer to other institutions; their liabilities will be sold to another lender or collections agencies - have no doubt that NCO or some other large collection company could find the underwriting to purchase these accounts for pennies on the dollar.

    I was actually suprised how many banks went "belly up" in 2000 per the FDIC.
  10. VJ

    VJ Well-Known Member

    Good grief.Banks don't go belly up....Unless you are proud owner of part of the 17 Billion dollar bonds that are floated.Big difference between a bond and a fdic insured deposit.Most of these will not be protected.

    The future intrinsic value of the company is dependent on where the economy is headed and a uncertainty as to where the bankruptcy rates head, especially if there is a rush to file under the old b/k laws.
    Here's a link to tract trends in b/k by state filings.

  11. bbauer

    bbauer Banned

    Thanks for that link.
    What I've also been looking for is a similiar list of divorce rates state by state.
    It would be interesting indeed to see how closely divorce rates might be tied to bankruptcy.
    Then look to see how closely those are tied to state income levels per state.
    Put those 3 together and one might just come up with some real interesting insights
  12. Hal

    Hal Well-Known Member

    Banks don't go belly up???? I believe they certainly do - not only does the Savings and Loan fiasco show this but regular banks also become insolvent:
  13. keepmine

    keepmine Well-Known Member

    NCO or any other collection agency won't be able to buy Providians preforming creit card porfoilio and still charge estreme interest rates. There is an interstate compact that allows banks to export high rates that would ordinarily violate state usury laws. One of the provisions of the compact is the bank must take in deposits to be considered a bank for these purposes. Orchard Bank is finding out about that the hard way in La. They have lost 2 rounds of appeals in Federal Court and now must fave a class action lawsuit. They had financed credit purchases from Campo in La. at 21.5% and the usury law was set at 18%. It was the late 90's before they accepted deposits. As I recall the lawsuit covers 900000 La. residents from 1988 to the period in the 90's when they did accept deposits. The lawsuit seeks the return of the 3.5% difference in the inerest rate plus punative damages.
  14. keepmine

    keepmine Well-Known Member

    My comment about a bank not going bellyup means you won't find the doors shut permanetly. It means the FDIC will protect depositors and find a new owner for the preforming assets and liquidate the nonpreforming assets.
  15. breeze

    breeze Well-Known Member

    Right. Banks are handled like insurance companies. They are taken over by the state.
  16. supershawn

    supershawn Well-Known Member

    I would think, with all the cardholders they have, that someone would want to buy them out. I would think the marketing database alone would be worth a lot of money.

    I know they are sub-prime and not the best, but they have always treated me well and were my 'first'. First post-BK, that is....

    You know what they say, 'your first isn't always the greatest but you'll always remember them'.

    I would hope they pull out of it. I'd like to see them do ok.

  17. GEORGE

    GEORGE Well-Known Member


    They would sell out to another bank...You would get another card with the new bank.
    You MAY get better terms than you have depending on who bought your account.
  18. bbauer

    bbauer Banned

    George, X.COM was a full fledged bank and did just exactly that.

    X.COM did not sell out to another bank. X.Com sold all their accounts, delinquent or otherwise to NCO. Pretty soon, people were getting notices from NCO that they had purchased their debts from X.Com and tacked on interest and other charges and said, "Now you owe us this amount. Pay up or else. Or at least words to that effect. Problem was, when you demanded validation, they could not come up with it.
    NCO isn't real good about giving out their credit cards. Guess they never have figured out how to deal in plastic.
    While I realize that everything you said is quite true in all normal situations, therefore I sure hope you don't think I am putting you down here because I'm not. But then who ever said NCO was a "normal" situation. I'd guess that what you have said would be true in at least 99/44-100ths of the cases.
  19. breeze

    breeze Well-Known Member

    I had a balance with - I haven't had any problems.
  20. Momof3

    Momof3 Well-Known Member

    George, X.COM was a full fledged bank and did just exactly that.

    X.COM was a complete joke they went out faster than they came in. The offered checking accounts with overdraft protection, not credit cards. Apples and Oranges here.

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