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

ucenyt.wordpress.com
That agreement addresses charges that theSprinhg House, Pa.-based company violated federal tradew laws through its pricing strategies on businessx credit cards, and in its marketing of cash-bacm rewards on the cards. Advanta said it did not admir wrongdoing and that it entered theagreementsx “in the interest of expediencty and to avoid litigation.” Advanta said it took a $14 millio charge to cover refunds tied to the alleged marketingy violations in third-quarter 2008 and will take a second-quarterr 2009 charge to cover refunds over its pricingb strategies, which it said coule total $21 million. Advanta also agreerd to a $150,000 fine.
In a separate agreement with the FDIC, Advanta’s ability to use cash and pay dividend s hasbeen restricted. The company must submit a plan toremainn "well-capitalized," and submit a plan to terminate its deposit-takinv operations and deposit insurance once its deposits are repaid in full, a process expecteed to take a few years. The second agreement with the FDIC placees restrictionson Advanta’s use of its cash assets, paymentf of dividends and transactions that wouldd materially alter its balance sheet composition and taking of brokeredf deposits.
Advanta said the second order does not in any way restricft it from continuing to service itsmanagec credit-card accounts and receivables. In an efforgt to limit losses and erosion of its capitall ascredit deteriorates, Advanta said in earlyt May that its securitization trust will go into earlt amortization — where the company uses receivables from customere to accelerate payment to investor bondholders. While that protects investorx from prolonged exposure to a pool of receivablesd whose credit performancehas deteriorated, Advanta would have needed an alternative way to fund new purchasex on its customers’ credit cards. So it had to shut down future use, effectivs May 30.
It has since referred some customers to AmericabExpress Co. Advanta’s stock closex 2 7 percent lower Wednesdat at42 cents.