Providian Financial Corporation
Audit and Compliance Committee Charter

Amended and Restated July 20, 2004

Committee Purpose

The Audit and Compliance Committee (the "Committee") is established pursuant to Article 3.1 of the Bylaws of Providian Financial Corporation (the "Company"). The Committee is appointed by the Board of Directors to assist the Board in monitoring (1) the integrity of the Company's financial statements, (2) the Company's compliance with legal and regulatory requirements, (3) the independent auditor's qualifications and independence, and (4) the performance of the Company's internal audit function and independent auditor.

The Committee shall prepare the report required by the rules of the Securities and Exchange Commission (the "Commission") to be included in the Company's annual proxy statement.

Limitation of Committee's Role

While the Committee shall be responsible for overseeing the accounting and financial reporting process of the Company and audits of the financial statements of the Company, it is not the duty of the Committee to plan or conduct audits or to determine that the Company's financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations. Management of the Company shall be responsible for the Company's financial reporting process and its compliance with applicable laws and regulations, and the Company's independent auditor shall be responsible for auditing the financial statements and expressing an opinion as to their conformity with generally accepted accounting principles.

Committee Membership

The Committee shall consist of three or more directors, all of whom shall meet the independence requirements of the New York Stock Exchange, Section 10A(m)(3) of the Securities Exchange Act of 1934 (the "Exchange Act") and the rules and regulations of the Commission, and any standards of independence as may be prescribed for purposes of any other laws relating to the Committee's duties and responsibilities. Each member of the Committee shall be financially literate, or shall become financially literate, in accordance with the requirements of the New York Stock Exchange. At least one member of the Committee shall be an "audit committee financial expert," as such term is defined by the Commission. Directors' fees shall be the sole compensation received by Committee members from the Company.

The members of the Committee shall be appointed by the Board on the recommendation of the Nominating and Corporate Governance Committee, and may be replaced by the Board. The Committee may also appoint a Secretary, who need not be a director.

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The Committee shall meet as often as it determines, but not less frequently than quarterly. The Committee shall meet periodically in separate executive sessions with management (including the chief financial officer and chief accounting officer), the internal auditor, and the independent auditor, and have such other direct and independent interaction with such persons from time to time as the members of the Committee deem appropriate. The Committee may request any officer or employee of the Company or the Company's outside counsel or independent auditor to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee.

Committee Authority and Responsibilities

The Committee shall have the sole authority to appoint or replace the independent auditor (subject, if applicable, to shareholder ratification). The Committee shall be directly responsible for the appointment, compensation, retention and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services. The Committee will not appoint as the independent auditor or continue the appointment of any auditor if the Company's chief executive officer, controller, chief financial officer, chief accounting officer or any other person serving the Company in an equivalent position was employed by such auditor and participated in any capacity in the audit of the Company within the one-year period preceding the date of the initiation of the applicable audit of the Company. The independent auditor shall report directly to the Committee.

The Committee shall pre-approve all auditing services, internal control-related services and permitted non-audit services (including the fees and terms of such services) to be performed for the Company by the independent auditor, subject to the de minimis exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act which are approved by the Committee. The Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant pre-approvals of audit and non-audit services, provided that any decision by such subcommittee to grant pre-approvals shall be presented to the full Committee at its next scheduled meeting.

The Committee shall have the authority to engage adequate resources, including the authority to retain independent legal, accounting or other advisors. The Company shall provide for appropriate funding, as determined by the Committee, for payment of compensation to the independent auditor for the purpose of preparing or issuing an audit report or performing other audit, review or attest services and to any advisors employed by the Committee.

The Committee shall make regular reports to the Board. The Committee shall review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval, and shall cause this Charter to be published in accordance with the requirements of the New York Stock Exchange and the Exchange Act. The Committee shall cause the preparation of the report of the Committee to be included in the Company's annual proxy statement. The Committee shall annually review the Committee's own performance and report the results of this review to the Board.

The Committee, as may be required by law, by the Commission, or by the rules of the New York Stock Exchange, or otherwise to the extent it deems necessary or appropriate, shall perform the following functions:

Financial Statement and Disclosure Matters

  1. Review and discuss with management and the independent auditor the annual audited financial statements, including disclosures made in "Management's Discussion and Analysis of Financial Condition and Results of Operations," and recommend to the Board whether the audited financial statements should be included in the Company's Form 10 K.
  2. Review and discuss with management and the independent auditor the Company's quarterly financial statements prior to the filing of its Form 10-Q, including the results of the independent auditor's review of the quarterly financial statements.
  3. Discuss with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of the Company's financial statements, including any significant changes in the Company's selection or application of accounting principles, the development, selection and disclosure of critical accounting estimates, and analyses of the effect of alternative assumptions, estimates or GAAP methods on the Company's financial statements.
  4. Review and discuss with management and the independent auditor any major issues as to the adequacy of the Company's internal controls and any special steps adopted in light of material control deficiencies and the adequacy of disclosures about changes in internal control over financial reporting.
  5. Review and discuss with management (including the senior internal audit executive) and the independent auditor the Company's internal controls report and the independent auditor's attestation of the report prior to the filing of the Company's Form 10-K.
  6. Discuss with management the Company's earnings press releases, including the use of "pro forma," or "adjusted" non-GAAP, information, as well as financial information and earnings guidance provided to analysts and rating agencies. Such discussions may be general in nature (consisting of the types of information to be disclosed and the types of presentation to be made).
  7. Review and discuss the report of the independent auditor on:
    1. all critical accounting policies and practices to be used;
    2. all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor; and
    3. other material written communications between the independent auditor and management, such as any management letter or schedule of unadjusted differences.
  8. Discuss with management and the independent auditor the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the Company's financial statements.
  9. Discuss with management the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Company's risk assessment and risk management policies.
  10. Discuss with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit, including any difficulties encountered in the course of the audit work, any restrictions on the scope of activities or access to requested information, and any significant disagreements with management.
  11. Review disclosures made to the Committee by the Company's Chief Executive Officer and Chief Financial Officer during their certification process for the Form 10-K or Form 10-Q about any significant deficiencies in the design or operation of internal controls or material weaknesses therein and any fraud involving management or other employees who have a significant role in the Company's internal controls.

Oversight of the Company's Relationship with the Independent Auditor

  1. Review and evaluate the lead partner of the independent auditor team.
  2. Obtain and review a report from the independent auditor at least annually regarding:
    1. the independent auditor's internal quality-control procedures,
    2. any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm,
    3. any steps taken to deal with any such issues, and
    4. all relationships between the independent auditor and the Company.
  3. Evaluate the qualifications, performance and independence of the independent auditor, including considering whether the auditor's quality controls are adequate and that provision of permitted non-audit services is compatible with maintaining the auditor's independence, taking into account the opinions of management and the internal auditor. The Committee shall present its conclusions with respect to the independent auditor to the Board.
  4. Ensure the rotation, as required by law, of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit. Consider whether, in order to assure continuing auditor independence, it is appropriate to adopt a policy of rotating the auditing firm itself on a regular basis.
  5. Set policies for the Company's hiring of employees or former employees of the independent auditor who participated in any capacity in the audit of the Company.
  6. As frequently as the Committee deems necessary or appropriate, discuss with the national office of the independent auditor material issues on which the national office was consulted by the Company's audit team and matters of audit quality and consistency.
  7. Meet with the independent auditor prior to the audit to discuss the planning and staffing of the audit.

Oversight of the Company's Internal Audit and Compliance Functions

  1. Review the appointment and replacement of the senior internal auditing executive and senior compliance executive.
  2. Review the significant reports to management prepared by the internal auditing department and the compliance department and management's responses thereto.
  3. Discuss with the internal audit department and the compliance department responsibilities, budget and staffing and any recommended changes in the planned scope of the internal audit or the compliance plan.

Compliance Oversight Responsibilities

  1. Obtain from the independent auditor assurance that Section 10A(b) of the Exchange Act (which relates to detection and notification of possible illegal acts) has not been implicated.
  2. Obtain reports from management, the Company's senior internal auditing, compliance and ethics executives and the independent auditor that the Company is in conformity with applicable legal requirements and the Company's code of business conduct and ethics. Review reports and disclosures of insider and affiliated party transactions. Advise the Board with respect to the Company's policies and procedures regarding compliance with applicable laws and regulations and with the Company's code of business conduct and ethics. Review significant cases of employee conflict of interest, misconduct or fraud, including all instances of such conduct that may have a significant effect on the Company's financial statements.
  3. Discuss with management, the senior internal auditing executive, the senior compliance executive and/or the independent auditor any correspondence with regulators or governmental agencies and any employee complaints or published reports which raise material issues regarding the Company's financial statements or accounting policies.
  4. Establish procedures for (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and (ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.
  5. Discuss with the Company's General Counsel legal matters that may have a material impact on the Company's financial statements, compliance policies or internal controls and any material reports or inquiries received from regulators or government agencies.
  6. Review the Company's risk management program and internal corporate risk management reports.
  7. Review the status of tax audits and appeals and the adequacy of tax reserves.