the entire credit card group lower, after the company disclosed that its issuance and billing business practices were being investigated by Connecticut's attorney general.
Shares of San Francisco-based Providian plunged as much as 23% after the company issued a press release that stated it had been contacted "in connection with a civil investigation into credit card issuance and billing practices." The stock finished the day off $26.25, or 22.73%, to $89.25, following a rocky session in which trading was twice halted to meet buy and sell order imbalances.
Other issuers fell as well. Capital One Financial Corp lost $3.1875, or 6%, to $49.9375; Metris Cos. $2.9375, or 8.44%, to $31.875; and MBNA Corp. $1.40625, or 6.22%, to $27.3125.
For the day, the American Banker index of the top 50 banks fell 0.13% and the index of the 225 U.S. banks 0.4%. The Dow Jones industrial average was up 0.13% and the Standard & Poor's 500 index 0.49%.
The inquiry, which Providian was notified about late Friday, comes on the heels of a similar investigation launched by California's district attorney in the spring.
Providian, the largest supplier of credit to customers with tarnished credit histories, also faces lawsuits by disgruntled investors that are seeking class action status.
The stock fell so dramatically because the market now perceives that California is not an isolated incident, analysts said.
"It's the second time for them," said Michael R. Hughes, a credit card analyst at Merrill Lynch Global Securities.
"The feeling is that if one or two states do it the other 48 will follow," Mr. Hughes said.
Providian said it is cooperating with Connecticut authorities. "We have confidence in the integrity of our business practices and are prepared to defend them," Providian chief public policy officer Konrad S. Alt said in a statement. "Providian is working hard to become an industry leader in customer service and satisfaction."
"Naturally, we hope to resolve this matter as quickly as possible," Mr. Alt said.
Providian has made similar statements about the probe by San Francisco authorities.
The inquiries and the suit focus largely on the way that Providian treats customers who make late payments. The suit accuses the company of imposing late fees unfairly by failing to record payments when they were received. The suit also contends that customers were unfairly charged penalties for being late.
Company spokeswoman Laurie Cole declined to comment on the suits. She did say that Providian has been taking steps to make itself more attuned to customer concerns. The company supplied additional training to its 4,000 customer service representatives to make them better able to handle customer complaints and sent a brochure about customer service to all 11 million of its account holders, Ms. Cole said.