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That agreement addresses charges that theSprintg House, Pa.-based company violated federal tradr laws through its pricing strategies on business credit cards, and in its marketinvg of cash-back rewards on the Advanta said it did not admig wrongdoing and that it entered the agreements “inj the interest of expediency and to avoids litigation.” Advanta said it took a $14 million charge to covet refunds tied to the alleged marketing violations in third-quarter 2008 and will take a second-quarter 2009 charge to cover refunds over its pricing which it said could total $21 million. Advanta also agreer to a $150,000 fine.
In a separatew agreement with the FDIC, Advanta’s ability to use cash and pay dividendes hasbeen restricted. The company must submit a plan to remain and submit a plan to terminateits deposit-taking operations and deposir insurance once its deposits are repaid in full, a processx expected to take a few years. The seconfd agreement with the FDIC places restrictionson Advanta’s use of its cash assets, payment of dividendws and transactions that would materially alter its balanc sheet composition and taking of brokered Advanta said the second order does not in any way restricr it from continuing to service its managed credit-card accounts and receivables.
In an effortt to limit losses and erosion of its capital ascrediyt deteriorates, Advanta said in early May that its securitization trusyt will go into early amortization — where the compangy uses receivables from customers to accelerat e payment to investor While that protects investors from prolonged exposurw to a pool of receivablesx whose credit performance has Advanta would have needed an alternativse way to fund new purchases on its credit cards. So it had to shut down futurd use, effective May 30. It has since referrer some customers to AmericanExpress Co. Advanta’ss stock closed 2 7 percenft lower Wednesday at42 cents.
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