In a move that has rankled privacy advocates - and may prod banks to withhold customer data from credit bureaus over fear of poaching by competitors - Providian Financial Corp. is pushing the marketing envelope with a balance-transfer offer tailored to individual cardholder balances.

On the surface, the Providian mailing seems similar to other balance transfer offers that have been a marketing staple of card issuers. What sets it apart is that the transfer checks it has been mailing to some of its own customers come pre-written, made out to the customer's other creditors. On the attached stub Providian suggests a payment based on the amount of how much the customer owes.

The information Providian uses for the checks is drawn from credit bureaus, a step some privacy experts say goes too far because it turns data intended as a guide to making lending decisions into a marketing tool.

"They are using credit reports for non-credit-related purposes," said Edmund Mierzwinski, consumer program director at the U.S. Public Interest Research Group in Washington. "You're not supposed to use a credit report except for credit, insurance, or employment, or for something the consumer has applied for."

Providian does not appear to be violating any laws by the offering, said L. Richard Fischer, a partner at Morrison & Foerster LLP in Washington. He said using credit bureau information for marketing falls under a gray area in the Fair Credit Reporting Act.

"It's possible that somebody could have obtained the information for a permissible purpose and then later used it for marketing and that is permissible if done the right way," Mr. Fischer said.

Fears about balance-poaching had already caused some issuers to stop reporting complete information about customers to credit bureaus. That, in turn, has ruffled feathers at the Federal Trade Commission and the Office of the Comptroller of the Currency.

Major issuers such as Citigroup Inc. and Morgan Stanley Dean Witter's Discover card have stopped reporting credit line and balance information to credit bureaus to keep their competitors from going after their best customers.

Citigroup declined comment for this story but previously the New York company has said it stopped reporting credit lines because, "We believe [the information] has been used for others to target solicitations to our key customers."

Industry experts say offers like Providian's will add fuel to the fire. With this offer, Providian is "opening up a can of worms," said Evan Hendricks, editor of Privacy Times, a Washington-based newsletter. "It's another thing that might discourage full reporting to credit bureaus, and then they will start to lose integrity because they aren't complete."

Providian counters that all issuers have continuous access to their customers' credit reports through the three major credit bureaus - Equifax Inc., Trans Union Corp., and Experian Inc. - and that it is simply using this data to make transferring a balance more convenient.

David Alvarez, president of Providian's credit card business, said the company has been offering this solicitation to new customers since 1995, mostly by phone. But recently the San Francisco-based issuer started mailing the solicitations to long-standing customers as well as new ones.

"It's very consistent with our approach to this business, which is to be a primary lender for our customers, so we try to provide a large enough credit line and the terms to make it attractive for customers to move all their balances to our card," Mr. Alvarez said.

Mr. Alvarez said the offer has been well received by most customers and that Providian gets a better response using a personalized approach instead of sending out blank balance transfer checks.

Equifax said Providian uses its account-monitoring service, which is available to all of its customers, allowing them to review their cardholders' credit reports at any time.

"The industry is having tremendous consolidation, and some of the more astute marketers are developing new ways to market their product; and leveraging the information that we provide in an account-review type of thing is helping create a competitive environment," a spokesman for Equifax said. "One of the purposes of account monitoring is to say, 'What can I do to enhance customer offers or relationships?' "

Some worry that the campaign could spur a backlash against the entire industry, especially when consumer mistrust for card issuers is rampant.

"Providian has been very aggressive," Mr. Hendricks said. "From a customer relationship point of view, to get something in the mail with a check made out to someone you owe money to is a pretty spooky experience."

The solicitation comes at a time when competition in the industry is at a high and banks are becoming more fearful of sharing customer data.

"It raises the specter of what should an appropriate use of the information be, because we're right up-front with this offer, saying we know what you have, we know where it is, and we want that business," said Anita Boomstein, a partner at Hughes, Hubbard & Reed in New York.

With consolidation in the credit card industry, some issuers are now large enough to rely on their own well-developed customer data bases and are reluctant to share that information with credit bureaus and ultimately their competitors. That trend more than anything else, some say, threatens to undermine a system that has been in place for years.

"Certain issuers are beginning to question whether the industry is mature enough to exist without an objective repository of information," said Lee Spirer, head of financial services at Mainspring Communications Inc., an Internet strategy consulting firm based in Cambridge, Mass.

Providian and many other card companies say it would be a mistake to dismantle the current practice of reporting consumer information.

"The bureau system we have today is part of how we have so successfully built a strong industry and seen the tremendous growth we've seen over the last 20 years," Mr. Alvarez said. "It allows consumers to have a choice."

Credit bureaus and companies like Fair, Isaac & Co., which is well known for its credit scoring business, may have the most to lose if more issuers start withholding their customer information.

"We would certainly be concerned if people would start to withhold the data," said Robert Heller, executive vice president and director at Fair, Isaac in San Rafael, Calif. "Then, a collaborative effort on behalf of the credit industry on the whole" would be damaged.

Equifax said it is concerned about the dearth of information coming out of certain lenders and that it plans to take action.

The Atlanta-based credit bureau is looking into ways to reinforce full reporting, a spokesman said, but he would not elaborate.

Experian, of Orange, Calif., analyzed its data to determine the impact of missing information. It found that 35% of consumers get lower credit scores when certain facts - the type that lenders are currently withholding - are missing. One credit card executive who requested anonymity said, "You've got a couple of large issuers who are getting beaten because some of the smarter, more savvy competitors are providing more value to customers, and this is a reaction that I don't think is very helpful to the industry."

"A customer's information is the customer's, not the bank's information, and hiding that information makes the customer look bad," the executive said. "They're hiding behind this idea of privacy, but with these checks the customer makes the choice, it's not the competitor making the choice."

Consumers will suffer if issuers stop reporting complete information, according to analysts.

"The less information available, the more risk to the lender, and the more the lender will need to get paid to eliminate that risk," said Gary Gordon, managing director at PaineWebber Inc. in New York. "If lenders start withholding," borrowing will become more expensive.

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