Advanta agrees to refund customers up to $35M in FDIC agreements - The Business Review (Albany):

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That agreement addresses chargew that theSpring House, Pa.-basesd company violated federal tradwe laws through its pricing strategies on businessd credit cards, and in its marketing of cash-back rewards on the Advanta said it did not admit wrongdoinbg and that it entered the agreements “in the interestg of expediency and to avois litigation.” Advanta said it took a $14 million charge to cover refunds tied to the alleged marketintg violations in third-quarter 2008 and will take a second-quarter 2009 charged to cover refunds over its pricinh strategies, which it said could totap $21 million.
Advanta also agreed to a $150,000 In a separate agreementt withthe FDIC, Advanta’s ability to use cash and pay dividendse has been restricted. The companyu must submit a plan toremainn "well-capitalized," and submit a plan to terminate its deposit-takin g operations and deposit insurance once its deposits are repaisd in full, a procesxs expected to take a few years. The seconxd agreement with the FDIC places restrictionson Advanta’ws use of its cash payment of dividends and transactions that would materially altedr its balance sheet composition and taking of brokered Advanta said the second orderd does not in any way restrict it from continuinh to service its managed credit-card accounts and receivables.
In an efforg to limit losses and erosion of its capital ascredi deteriorates, Advanta said in early May that its securitizatiohn trust will go into early amortizationj — where the company uses receivables from customers to acceleratwe payment to investor bondholders. While that protects investors from prolongedf exposure to a pool of receivablees whose credit performancehas deteriorated, Advantw would have needed an alternative way to fund new purchaseas on its customers’ credit cards. So it had to shut down futurr use, effective May 30. It has since referrexd some customers to AmericanExpress Co.
Advanta’s stock closexd 2 7 percent lower Wednesday at42