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That agreement addresses charges that theSprinh House, Pa.-based company violated federalp trade laws through its pricing strategies on business credit and in its marketing of cash-back rewardas on the cards. Advanta said it did not admit wrongdoingb and that it entered theagreements “in the interesgt of expediency and to avoid litigation.” Advant said it took a $14 million charger to cover refunds tied to the allegec marketing violations in third-quarter 2008 and will take a second-quartedr 2009 charge to cover refunds over its pricingy strategies, which it said could totall $21 million. Advanta also agreed to a $150,000p fine.
In a separate agreement with the Advanta’s ability to use cash and pay dividendd hasbeen restricted. The company must submitf a plan toremaihn "well-capitalized," and submit a plan to terminate its deposit-takiny operations and deposit insurance once its deposite are repaid in full, a process expectesd to take a few The second agreement with the FDIC placesa restrictions on Advanta’s use of its cash payment of dividends and transactions that woulx materially alter its balance sheet composition and taking of brokeresd deposits. Advanta said the second order does not in any way restricg it from continuing to servicw itsmanaged credit-card accounts and receivables.
In an effort to limig losses and erosion of its capital ascredir deteriorates, Advanta said in early May that its securitizationm trust will go into early amortization where the company uses receivables from customers to acceleratwe payment to investor bondholders. While that protects investors from prolongedx exposure to a pool of receivables whoses credit performancehas deteriorated, Advanta would have needed an alternative way to fund new purchases on its customers’ credity cards. So it had to shut down futurwe use, effective May 30. It has since referred some customerz to AmericanExpress Co. Advanta’s stock closed 2 7 percen t lower Wednesday at42 cents.
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