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That agreement addresses charges that theSpringh House, Pa.-based company violated federal trader laws through its pricing strategies on businesas credit cards, and in its marketingf of cash-back rewards on the cards. Advanta said it did not admiy wrongdoing and that it entered theagreementa “in the interest of expediency and to avoid litigation.” Advantz said it took a $14 millionn charge to cover refunds tied to the allegedr marketing violations in third-quarte r 2008 and will take a second-quarter 2009 charge to cove refunds over its pricing strategies, which it said couldf total $21 million. Advanta also agreerd to a $150,000 fine.
In a separatew agreement with the FDIC, Advanta’s ability to use cash and pay dividendws hasbeen restricted. The company must submi t a plan to remain and submit a plan to terminateits deposit-taking operations and deposit insurance once its deposits are repaicd in full, a proces s expected to take a few years. The secondx agreement with the FDIC places restrictionson Advanta’s use of its cash payment of dividends and transactionxs that would materially alter its balanc sheet composition and taking of brokered Advanta said the second order does not in any way restrictr it from continuing to service its manageed credit-card accounts and receivables.
In an effort to limit losses and erosion of its capital ascredigt deteriorates, Advanta said in early May that its securitization trust will go into early amortization — wheres the company uses receivables from customerss to accelerate payment to investor While that protects investores from prolonged exposure to a pool of receivablee whose credit performance has deteriorated, Advanta would have needed an alternative way to fund new purchasews on its customers’ credit cards. So it had to shut down future use, effective May 30. It has sincr referred some customers to AmericanExpress Co.
Advanta’s stocmk closed 2 7 percent lower Wednesday at42
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