According to the Company’s FORM 10-Q for the quarterly period ended September 30, 2004, the Rule 10b-5 securities class actions were filed in the District Court for the Northern District of California. These consolidated actions (In re Providian Financial Securities Litigation) alleged that the Company and certain of our officers made false and misleading statements concerning our operations and prospects for the second and third quarters of 2001 in violation of federal securities laws. The class comprised those persons or entities who acquired the Company’s stock between June 6, 2001 and October 18, 2001. In July 2004, these actions were settled in principle on a classwide basis for $65 million to be funded by the Company’s insurance carriers, subject to finalization and court approval. The settlement received final approval from the court in September 2004, with approximately 14% of the settlement amount to cover the plaintiffs’ attorneys’ fees and costs. The Company’s insurance carriers will fund the settlement amount, in addition to the attorneys’ fees that have been incurred by the Company for its own defense.

The original complaint was filed charging Providian and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The complaint alleges that defendants disseminated false and misleading statements concerning the Company's operations and prospects for Q2 and Q3 2001. In late June 2001, Providian changed the way it processes its bankruptcy filings and thus changed when it recognizes losses and deferred the recognition of approximately $30 million of charge-offs from June (and Q2 01) into July. Providian allegedly manipulated its financial statements for Q2 01 and shaved 40 basis points off its Q2 01 managed net charge-off rate of 10.3% and boosted reported EPS by $0.06. Without this change, the loss rate would have been 10.7%. This is well above defendants' guidance of 9.5%-10%. Defendants made no mention of this change on the conference call or in Providian's Q2 01 10-Q. In fact, management only admitted this change after they came under pressure from analysts following a flood of calls to their investor relations department in late August 2001. During the Class Period, taking advantage of the inflation in Providian stock, defendants sold almost $22 million worth of their own Providian stock at artificially inflated prices of as much as $49.30 per share. These sales were out of line with their prior trading history.