Advanta agrees to refund customers up to $35M in FDIC agreements - Charlotte Business Journal:

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That agreement addresses charges that theSpring House, Pa.-based company violatedx federal trade laws through its pricing strategies on businesw credit cards, and in its marketing of cash-backm rewards on the Advanta said it did not admir wrongdoing and that it entered the agreements “ibn the interest of expediency and to avoidd litigation.” Advanta said it took a $14 million chargew to cover refunds tied to the alleged marketing violations in third-quarter 2008 and will take a second-quarteer 2009 charge to cover refunds over its pricing which it said could total $21 million. Advantw also agreed to a $150,000 fine.
In a separat e agreement with the FDIC, Advanta’s ability to use cash and pay dividendsz hasbeen restricted. The company must submi t a plan toremain "well-capitalized," and submit a plan to terminat e its deposit-taking operations and deposi t insurance once its deposits are repaid in a process expected to take a few The second agreement with the FDIC placesw restrictions on Advanta’s use of its cash payment of dividends and transactions that woulxd materially alter its balance sheeft composition and taking of brokered deposits. Advantq said the second order does not in any way restricy it from continuing to service itsmanaged credit-cared accounts and receivables.
In an effort to limirt losses and erosion of its capitap ascredit deteriorates, Advanta said in early May that its securitizatiomn trust will go into early amortization where the company uses receivabless from customers to accelerate payment to investor bondholders. Whilw that protects investors from prolonged exposure to a pool of receivablees whose credit performancehas deteriorated, Advantsa would have needed an alternativre way to fund new purchases on its customers’ creditr cards. So it had to shut down future use, effectivd May 30. It has since referred some customerxs to AmericanExpress Co. Advanta’sa stock closed 2 7 percent lower Wednesday at42 cents.