Saying that Providian Financial Corp. (NYSE: PVN) deliberately copied one of its banner advertisements to divert consumers to its own credit card origination site, online consumer credit company NextCard (Nasdaq: NXCD) announced Thursday that it filed a lawsuit claiming copyright infringement and unfair business practices.
San-Francisco-based NextCard calls itself the creator of the "First True Internet Visa," a credit card dedicated solely to Internet transactions. San Francisco-based Providian Financial Corp. is a recent spin-off of Providian Corp. It sells a variety of loan products to its 10 million customers and is one of the 10 largest credit card issuers in the country.
NextCard claims that over two million people have applied for its Internet Visa since the site launch in 1997. It says that its direct marketing approach has won legions of new customers and that its banner ads have become "celebrated within the Internet community."
"With our leadership position on the Internet and the unique features we offer, we welcome fair competition in the marketplace," said NextCard's general counsel, Robert Linderman. "But when someone tries to deceive and divert our customers and potential customers by copying our banners, we are forced to act."
Representatives for Providian Financial Corp. were unavailable for comment Thursday morning.
Billions At Stake
The lawsuit reveals the fiercely competitive nature of the credit card industry. Denounced by many in the United States as exploitative, the industry has mushroomed even as disposable income for many Americans has increased.
Virtually every household in America has been an eyewitness to the direct marketing 
blitz - a corporate carpet bombing - that brings promises of the "lowest APR" and bonus points.
NextCard CEO Jeremy Lent agrees with predictions that the Internet could generate up to 25 percent of credit card originations in the next three to four years. The industry could generate up to $200 billion (US$) by then - $40 to $50 billion of that online if projections hold true.
No wonder then that NextCard decided to Providian to court. The company said it tried to settle the matter with Providian "amicably," but was rebuffed.
Ironically, Lent is the former chief financial officer for Providian. His former company, which has $16 billion under management, bought consumer loan site, GetSmart, for $33 million in cash in February and announced the formation of an e-commerce division.
In May, Providian rolled out its new online credit card, Aria Visa. It is going toe to toe with NextCard's offerings, which are attracting 10,000 new customers a month.
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