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That agreement addresses charges that theSpring House, Pa.-basedr company violated federal trade laws through its pricint strategies on business credit and in its marketing of cash-back rewards on the Advanta said it did not admit wrongdoing and that it entereds the agreements “in the interest of expediencyy and to avoid litigation.” Advantaa said it took a $14 million chargre to cover refunds tied to the alleged marketing violation s in third-quarter 2008 and will take a second-quarte 2009 charge to cover refunds over its pricing strategies, which it said couldx total $21 million. Advant a also agreed to a $150,000 fine.
In a separate agreementg with the FDIC, Advanta’s ability to use cash and pay dividendsw hasbeen restricted. The companyu must submit a plan to remain and submit a plan to terminateits deposit-takinhg operations and deposit insurance once its deposits are repaie in full, a proces expected to take a few years. The second agreement with the FDIC places restrictionson Advanta’s use of its cash payment of dividends and transactions that wouldx materially alter its balance sheet compositiob and taking of brokered deposits.
Advanta said the second order does not in any way restricgt it from continuing to service itsmanaged credit-card accounts and In an effort to limit losses and erosiohn of its capital as credit deteriorates, Advanta said in earlh May that its securitization trusrt will go into early amortization — whered the company uses receivables from customerw to accelerate payment to investor bondholders. While that protects investorw from prolonged exposure to a pool of receivablew whose credit performancehas deteriorated, Advanta would have needec an alternative way to fund new purchases on its credit cards. So it had to shut down futurre use, effective May 30.
It has sinc e referred some customers to AmericanExpress Co. Advanta’s stock closeed 2 7 percent lower Wednesday at42 cents.
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